Pakistan’s FATF Challenge

Being the frontline ally in global counterterrorism drive Pakistan has played a very crucial role and sacrificed a lot even though intense scrutiny over the terrorism financing and failing to implement anti-money laundering laws and is put on the Financial Action Task Force (FATF) ‘grey list’.

The lack of initiative and failure to cooperate with the U.S. authorities can prompt the international community to adopt even tougher measures, which could be economic sanctions and inclusion into the list of blacklisted countries. Since the tragic incident of 9/11 new ways and means introduced to deal with a new form of terrorism, concepts like terror financing and money laundering also the byproduct of tackling terrorism. The U.S. has put America first at the forefront at the global anti-money laundering network in a way that other countries too start accepting the U.S. preferences as their own.

The FATF is a global body that combats terrorist financing and money laundering channels, fight organized crime, illegal exchanges and procurement of weapons across borders. By and large, there are 37 permanent members of FATF. In June 2010, Pakistan agreed with FATF on an Action Plan to address the strategic deficiencies in Pakistan’s AML/CFT regime.

The Action Plan included measures to address strategic deficiencies in legal, operational and enforcement areas concerning criminalization of money laundering and terrorist financing; functioning of Financial Intelligence Unit; freezing of terrorist’s assets under UNSCR 1267 and UNSCR 1373; money remittance business; and cross-border movement of currencies. Pakistan completed the Action Plan in June 2014 and subsequently, AP-RRG team visited Pakistan in December 2014 to confirm the status of implementation of the action plan. The AP RRG/ICRG report confirmed completion of Action Plan by Pakistan.

A joint resolution submitted against Pakistan was moved by UK and USA to the FATF for nominating Pakistan placement in the Grey List and this nomination was endorsed by France and Germany. Consequently, ICRG of the APG has identified four key areas of consternation and deficiencies in the direction of Anti-Money Laundering (AML) and Counter-Terrorism Financing regimes, cross-border illicit movement of currency by terrorist groups, progress on terrorism financing investigation and prosecution and implementation of the United Nations Security Council resolutions 1267 and 1373, for curbing terror financing. In response to that with the consultations of concerned authorities and stakeholders Pakistan has prepared the manual with mentioning 26- point action plan to comply with FATF demands.

1. Money laundering and terrorist financing risks are understood and, where appropriate, action must be coordinated domestically to combat money laundering and the financing of terrorism and proliferation.

2. International cooperation delivers appropriate information, financial intelligence and evidence, and facilitates action against criminals and their assets.

3. Supervisors appropriately supervise, monitor and regulate financial institutions for compliance with AML/CFT requirements commensurate with their risks.

4. Financial institutions and DNFBPs adequately apply AML/CFT preventive measures commensurate with their risks and report a suspicious transaction.

5. Legal persons and arrangements are prevented from misuse for money laundering or terrorist financing and information on their beneficial ownership are available to competent authorities without impediments.

6. Financial intelligence and all other relevant information are appropriately used by competent authorities for money laundering and terrorist financing investigations.

7. Money laundering offence and activities are investigated, and offenders are prosecuted.

8. Proceeds and instrumentalities of a crime are confiscated.

9. Terrorist financing offences and activities are investigated and persons who finance terrorism are prosecuted and subjected to effective, proportionate and dissuasive sanctions.

10. Terrorists, terrorist organisations and financiers are prevented from raising, moving and using funds, and form abusing the non-profit organisations (NPO) such as the NGOs sector.

11. Persons and entities involved in proliferation are prevented from raising, moving and using funds in accordance with the relevant United Nations Security Council resolutions.

In the meanwhile, ICRG had been asking APG for the update on Pakistan despite having referred the matter to APG for further monitoring. After the last APG Annual meeting held in July 2017, APG shared with ICRG APG’s Analysis Report on Pakistan’s 2017 report. The APG Analysis report acknowledged Pakistan’s progress in taking further actions to curtail the operational and fund-raising activities of the entities of concern, however, the report also identified some remaining areas of concerns on implementation.

Besides initially agreeing to Pakistan’s outline of countermeasures, the FATF Plenary decided to place the country on the Grey List. Pakistan was previously on the Grey List from 2012 to 2015. Taking everything into account Most of the concerns raised by the US concerning deficiencies in our Counter Financing Terrorism and Anti-money laundering regime had already been addressed in 2015 when Pakistan was taken off the “grey list”.

Ministry of Foreign Affairs is the central authority under the United Nations (Security Council) Act, 1948 to give legal effect to UNSCRs in Pakistan through the issuance of Statutory Regulatory Orders (SROs). Ministry of Foreign Affairs has issued a total of 317 S.R.O.s (up to 28th December 2017) to give legal effect to these sanctions. These S.R.Os are promptly issued, notified through Gazette of Pakistan and circulated to all relevant Federal and Provincial Government Departments and financial institutions for implementation.

The Government has taken several measures to enhance inter-agency cooperation and coordination for effective implementation of UNSCR 1267 sanctions. On 24th August 2017, NACTA issued National Guidelines for regulating hides/charity collection to all civil and law enforcement authorities of the country. As per guidelines, NGOs, NPOs, etc. desiring to collect hides of sacrificial animals would be required to obtain NOC from the office of Deputy Commissioner as well as for publishing any printed material or verbal announcements for hides/funds collection. The Guidelines also prescribe that the hides/donations collecting organization or any of its office bearers should not be, directly or indirectly, associated with any proscribed organization under ATA, 1997 or enlisted under UNSCR 1267 sanctions regime.

Guidelines also restrict seeking of donations through any printed material (pamphlet, banner, social media ads) or verbal announcements, etc. subject to mandatory NOC. Any violation would be dealt with under penal provisions of ATA, 1997. Prior to above, NACTA issued directives to all authorities on 17th May 2017 regarding fundraising in cash or kind by NGOs/NPOs & Charities during the holy month of Ramadan. The directive mentioned that fundraising by proscribed/listed entities and persons from the public is a serious offence.

The CFTUs in all Counter Terrorism Departments (CTDs) of the provinces have been established to focus on the financial aspect of the investigation as a core task during the investigation. NACTA is consistently encouraging the CTDs and imparting training to them in the areas of money laundering, terrorist financing, assets tracing and other necessary skills in the realm of financial investigations. Training modules on CFT are being prepared for making them part of the curriculum at all levels of police training to sensitize police officials about the importance of choking funding for terrorists as part of an effective counter-terrorism strategy.

Pakistan Telecommunication Authority (PTA) has developed an e-portal system to launch complaints against the misuse of the internet for the purposes of terrorism and the financing of terrorism. After the analysis of relevant web content, the Government Departments submit requests to PTA for blocking the URLs through the e-portal system. Initially, 41 such URLs associated with LeT/JuD/FiF have been blocked inside Pakistan thus preventing the entities of concern from raising funds online. Some of these URLs re-emerged as full blocking of such websites/links is very challenging as numerous proxy sites/applications are continuously being built. These proxy sites have the capability to access any blocked content and bypass the normal channels of communication using encryption techniques.

The Government of Pakistan has made a significant investment in creating public awareness about the need to refrain from donating to proscribed and UN listed entities.NACTA has published a list of Safe/Credible NGOs/NPOs to whom donations can be given. The list has been finalized by Pakistan Center for Philanthropy (PCP) in partnership with NACTA. The purpose of this list is to inform the general public not to give donations to organizations involved in extremism/terrorism. The list is available on NACTA’s website.

As a responsible member of the international community, Pakistan is fully cognizant of and committed to implementing its international obligations. Pakistan has made significant contributions to the international fight against terrorism and in the process has suffered major loses both in terms of lost lives and cost to its economy. Pakistan has a major share in the successes which the international community has achieved in this fight. Pakistan has taken a number of measures to strengthen its implementation of the UNSCR 1267 sanctions on the listed entities and individuals.

This is, however, a continuing effort. Pakistan’s overall compliance with the UNSC 1267 Sanctions regime needs to be assessed in a holistic manner. The actions mentioned in this report are a manifestation of the commitment of the Government to fully implement its obligations in this regard. The Government of Pakistan stands committed to taking all necessary measures to fully comply with its obligations to implement the sanctions on the listed entities.

DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy and position of Regional Rapport.