Noor Israr describes a significant development
As was widely anticipated the Financial Action Task Force (FATF) finally removed Pakistan from a list of countries under increased monitoring also known as the grey list. Addressing the press conference at the conclusion of its plenary, FATF President noted that Pakistan finally exits FATF grey list had been on the grey list since 2018 working on two concurrent action plans and after a lot of work by Pakistani authorities, they have largely addressed all of the action plan items. He stated that the task force had conducted an onsite visit at the end of August and the onsite team verified that there is a high level of commitment from the Pakistani leadership, sustainability of reforms, and commitment to make improvements in the future.
As a result of these action plans, Pakistan has made significant improvements to strengthen the effectiveness of this framework for combating terrorism financing. Steps had also been taken to strengthen risk-based supervision of financial and non-financial institutions, improve asset confiscation outcomes, and investigate and prosecute money laundering, and consequently, Pakistan finally exits FATF grey list and has been removed from the increased monitoring list. In its handout, the FATF stated that it welcomed Pakistan’s significant progress in improving its anti-money laundering and combating financing terror (AML/CFT) regime.
Pakistan has strengthened the effectiveness of its AML/CFT regime and addressed technical deficiencies to meet the commitments of its action plans regarding strategic deficiencies that the FATF identified in June 2018 and June 2021, the latter of which was completed in advance of the deadlines, encompassing 34 action items in total. It concluded that Pakistan is, therefore, no longer subject to the FATF’s increased monitoring process adding that the country would continue to work with the Asia-Pacific Group to further improve its AML/CFT system.
International Financial System
The plenary regarding the matter focused on jurisdictions identified as presenting a risk to the international financial system, with an update to public statements that identify jurisdictions as high risk or being subject to increased monitoring besides other key issues, including guidance on improving beneficial ownership transparency to prevent shell companies and other opaque structures from being used to launder illicit funds. Pakistan was included among jurisdictions under increased monitoring list in June 2018 for deficiencies in its legal, financial, regulatory, investigations, prosecution, judicial and non-government sectors to fight money laundering and combat terror financing considered a serious threat to the global financial system.
Islamabad made high-level political commitments to address these deficiencies under a 27-point action plan. But later the number of action points was enhanced to 34. The country had since been vigorously working with FATF and its affiliates to strengthen its legal and financial systems against money laundering and terror financing to meet international standards in line with 40 recommendations of the FATF. A 15-member joint delegation of the FATF and its Sydney-based regional affiliate — Asia Pacific Group — paid an onsite visit to Pakistan from 29 August to 2 September to verify the country’s compliance with the 34-point action plan committed with the FATF.
The authorities that had kept the countrywide visit of the delegation low profile later termed it a smooth and successful visit. The delegation conducted detailed discussions with relevant agencies pursuant to the authorization of an Onsite Visit by FATF Plenary in June 2022 the focus of the visit was to validate on-ground Pakistan’s high-level commitment and sustainability of reforms in AML/CFT regime and it looked forward to a logical conclusion to the evaluation process.
FATF’s International Cooperation Reviews
The report of the FATF Onsite team will be discussed in FATF’s International Cooperation Review Group and plenary meetings. Pakistan believed that as a result of strenuous and consistent efforts over the past four years, it has not only achieved a high degree of technical compliance with FATF standards but also ensured a high level of effectiveness through the implementation of two comprehensive FATF action plans.
In June this year, FATF had found Pakistan compliant or largely compliant on all 34 points and had decided to field an onsite mission to verify it on the ground before formally announcing the country’s exit from the grey list that finally took place in August and September. In terms of technical compliance with FATF standards, Pakistan has been rated by APG as compliant or largely compliant in 38 out of 40 FATF recommendations in August this year, which placed the country among the top compliant countries in the world. The completion of the FATF/APG action plan for the effectiveness of AML/CFT was also a structural benchmark of the IMF for end-March 2022 and was achieved in June with a minor delay.
The government had given a commitment to the IMF to review by end-June 2022 the implementation of AML/CFT controls by financial institutions with respect to the tax amnesty program for the construction sector and promised to meet the timelines for the implementation of APG’s 2021 Action Plan, including on the mutual legal assistance framework, AML/CFT supervision, transparency of beneficial ownership information, and compliance with targeted financial sanctions for proliferation financing. The Weekender