New Delhi: The Financial Action Task Force (FATF), the international money laundering watchdog, is to closely scrutinize Pakistan’s progress record on curbing money flows to terrorists and terrorist organizations when it meets in Paris next week.
The 13-18 October meet will consider the findings of the mutual evaluation report (MER) on Pakistan brought out by FATF’s regional body, the Asia Pacific Group (APG) on Money Laundering. The report was based on information provided by Pakistan and an assessment by representatives of a group of countries who visited Pakistan last October.
The APG report had found many gaps in Islamabad’s efforts to arrest the flow of finances to terrorist groups and reduce the activities of UN-designated terrorist groups such as the Lashkar-e-Toiba. The report notes that Pakistan, which has been on the FATF’s gray list since last year, has a “high-level commitment to fighting terrorism" but prosecution and investigation had not “been fully integrated into a national strategy in line with Pakistan’s terror-financing risks".
At the FATF meeting in Orlando in June, Pakistan had not been placed on the blacklist largely because of support from three countries, including Turkey. It had then bought itself some time to comply with the recommendations of the watchdog.
This time, too, Pakistan could avoid being placed on the black list because of help from China, Turkey, and Malaysia, two people familiar with FATF matters separately said. According to the charter of the 39-member FATF, the support of at least three member states is essential to avoid the blacklisting.
However, there is a group of countries within FATF that feels that Pakistan needs to “do more and comply with the pledges it made" at the Orlando meeting of FATF, one of the two people cited above said.
Given that Pakistan was found “non-compliant" on five FATF recommendations and “partially compliant" on 25 others out of a list of 40 recommendations according to the APG report, there is a case for Islamabad to be placed on the black list. However as a compromise, Pakistan could be placed on a “dark gray list", which means more intense scrutiny and pressure on the country to abide by its commitments. Being put in the “dark gray list" means Pakistan will find it difficult to source foreign investments at a time when its economy is still in a tight spot despite having received a $6 billion loan from the International Monetary Fund.
A downgrade to FATF’s black list, which currently has Iran and North Korea in it, means international investors would be wary of putting money into Pakistan.
“Pakistan authorities have varying levels of understanding of the country’s ML (money laundering) and TF (terrorist financing) risks. For ML, there is no clear understanding among competent authorities, including LEAs (law enforcement agencies), of Pakistan’s ML risk," said the APG report.
“For TF, competent authorities have a mixed understanding of risk. The national TF probe agency (Federal Investigation Agency, FIA) has a low level of TF risk understanding, while provincial police TF investigation departments (counterterrorism departments, CTDs) have a better understanding of those risks within their provinces. Punjab CTD, in particular, has a reasonable understanding of TF risks within Punjab province," it said.