Pakistan fails to convince FATF of efforts to combat terrorism2 min read . Updated: 13 Oct 2020, 09:32 AM IST
The country will remain in the enhanced follow-up list despite hurrying through 3 crucial legislations
Pakistan has failed a peer review by the Financial Action Task Force (FATF), the global watchdog that examines ways to plug the flow of funds to terrorist groups among other things, despite the country pushing through three laws last month to buttress its claims of combating terrorism.
“Pakistan will remain in enhanced (expedited) follow-up" and will continue to report back to the Asia Pacific Group (APG) of the FATF on the “progress to strengthen its implementation of anti-money laundering/combating financing of terrorism (AML/CFT) measures," according to a follow-up report by the APG to an assessment done last year and made public on Monday. However, the report also said that Pakistan has “made some progress in addressing the technical compliance deficiencies identified in its mutual evaluation report", it said.
The 41-member APG had in August last year downgraded Pakistan’s status to the “enhanced follow-up" category from “regular follow-up" over technical deficiencies to meet normal international financial standards. “Enhanced follow-up" is an intensive process of correction that deals with members with significant deficiencies in technical compliance or effectiveness in their AML/CFT systems.
“Enhanced (expedited) follow-up," means Pakistan will have to give monthly reports of its compliance, a clear sign that all the steps that it has taken so far has failed to convince the international community that it has plugged channels of money flows to terrorist groups, said a person familiar with the matter. “This (expedited follow up) means more pressure on Pakistan to comply," the person said.
The latest development means that Pakistan is likely to remain in the “gray list" despite the country hurrying through three crucial legislations, the Anti-Terrorism Act (Amendment) Bill, 2020, the Anti-Money Laundering (Second Amendment) Bill, and the Islamabad Capital Territory (ICT) Waqf Properties Bill, through parliament by calling a special session in September.
The APG evaluation of Pakistan comes weeks before an FATF plenary on 21-23 October that will examine its performance to meet global commitments and standards on the fight against money laundering and terror financing.
Countries on the “gray list" find it increasingly difficult to receive financial aid from the institutions such as the International Monetary Fund, the World Bank, the Asian Development Bank, and other European organizations. Pakistan is keen to attract foreign investment as its precarious economic situation has become more vulnerable because of the pandemic.
Pakistan needs the support of 12-15 countries to exit the “gray list". The silver lining for the country is that it is unlikely to be put on FATF’s “black list" as it has the support of China, Turkey and Malaysia. A country requires the support of at least three member countries to stay off the “black list".
The APG report, known as first “Follow-Up Report on Mutual Evaluation of Pakistan" concluded that Pakistan’s progress on the 40 FATF recommendations on the effectiveness of AML/CFT system has largely remained unchanged from a year ago.
Pakistan was found to be “partially compliant" on 25 of 40 recommendations, it was found to be “non compliant" on four, “largely compliant" on nine parameters, and “fully complaint" on one. The country’s measures against money laundering and terror financing “are not yet sufficient to justify a re-rating" by the FATF, the report said.