Pakistan is likely to be retained on the grey list of the Financial Action Task Force (FATF), the terror watchdog said in its report, as it pointed that the country has not taken sufficient measures to implement the conditions stated in the United Nations Security Council Resolution (UNSCR) 1267 against terrorists associated with terror groups like the Lashkar-e-Taiba and the Jamaat-ud-Dawa.
“Pakistan faces high risks of money laundering and terror financing and has complied with just one the 40 recommendations set by the Financial Action Task Force at the time of the country’s inclusion in its grey list,” said the 228-page Mutual Evaluation Report by the Asia-Pacific Group (APG) of the FATF. It was released on Saturday (October 5), reported news agency PTI.
The UNSCR 1267 had stated that sanctions would be on the member nation to which a terrorist belongs if the country failed to combat terrorism. And APG is a regional body of the FATF that ensures proper implementation of international regulations against money-laundering, terrorism financing, and increase in financing for weapons that cause mass destruction.
This comes in the backdrop of a key FATF plenary meeting, which will give its decision on Pakistan’s grey list status, due in another week. The neighbouring country was placed on the grey list in June 2018 and was given a plan of action to complete by October 2019.
The cut-off date for Pakistan to show improvement to APG was October 2018 and the Pakistani authorities insisted that they made a lot of progress during the past year, PTI said.
However, the report pointed out that of the 40 recommendations of the terror watchdog, Pakistan was fully compliant only on one. Another report by The Express Tribune stated that the country was largely compliant on nine, partially compliant on 26 and non-compliant on four recommendations.
Therefore, the APG report said, “Chances are high that Pakistan would be retained on the grey list during the FATF plenary meetings from October 13 to 18 in Paris.”
On the level of effectiveness of Pakistan’s Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT), Pakistan was found moderately effective only on one benchmark while on the remaining nine its effectiveness was declared as low as of October 2018 cut-off date, the report said.
It has also disagreed with Pakistan’s assessment that it faces “medium” category risks of money laundering and terrorism financing. Contrary to this assessment, the report said that Pakistan faces significant risk of terror financing, both from legitimate and illegitimate sources, as well as weak or no, regulation and supervision of certain sectors such as hawala/hundi, NPOs (Non-Profit Organisation) and DNFBPs (Designated Non-Financial Businesses and Professions) and porous borders.
The report added that corruption, drug trafficking, fraud, tax evasion, smuggling, human trafficking, and organised crime were major predicate offences to money laundering and areas of high risk. It said that Pakistan officials and institutions lack the capacity to understand the issues of money laundering and its threats.
“Competent authorities have varying levels of understanding of the country’s money laundering and terror financing risks, and the private sector has a mixed understanding of risks,” the report said.
While Pakistan established a multi-agency approach to implementing its AML/CFT regime, it was not implementing a comprehensive and coordinated risk-based approach to combating money laundering and terror financing, it said.
There are no measures in place to address the money laundering and terror financing risks posed by trusts, including foreign trusts, and waqfs in Pakistan, the report said.
The APG report, however, applauded Pakistan’s efforts to combat corruption. “Corruption is endemic across Pakistan’s economy, although Pakistan is to be commended for its recent initiatives to prevent and detect corruption,” it said.
The report advised that Pakistan should significantly enhance the use of financial intelligence in money laundering, terror financing, and predicate crime cases, particularly the use of financial intelligence to target terrorist groups and higher- risk predicate crimes.
It also sought improvement in asset confiscation that should commensurate with Pakistan’s money laundering and terror financing risks, including cross-border currency.
(With inputs from agencies)