Stuck with FATF



March 12, 2022

Malik Nasir Mahmood Aslam comments on a discouraging development on Stuck with FATF

It was widely anticipated that Stuck with FATF would keep Pakistan on its grey list and getting out of it to the white list were extremely remote. Even many of the official circles were not hopeful about Pakistan’s prospects of making it of the grey list and this is what has precisely happened. The reason of retaining Pakistan on the grey list was that the FATF is now insisting to comply with just two target points of 34 points given to Pakistan for compliance earlier. FATF has pointed out that it is retaining Pakistan on its terrorism financing grey list and has asked the country to address the remaining deficiencies in its financial system as soon as possible. Just to make the decision slightly pliable FATF appreciated Pakistan’s robust progress on its global commitments to fight financial crimes.
Interestingly and rather a sop to Pakistan, the FATF added the United Arab Emirates to its increased monitoring list that means the financial systems of the countries known to have inadequate controls over terrorism financing. At the end of the session FATF also announced appointment of T. Raja Kumar of Singapore as its next president for a fixed two-year term. It may be recollected that Pakistan was placed on the list in 2018, which made foreign firms more cautious about investing in the country.
The recent plenary has noted Pakistan had completed 26 of the 27 action items in its 2018 action plan of the Stuck with FATFand of the seven action items of the 2021 action plan of the watchdog’s Asia Pacific Group on Money Laundering (APG) ahead of the deadlines. It was noted that since June 2018 when Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its anti-money laundering/combating the financing of terrorism (AML/CFT) regime and to address its strategic counter-terrorist financing-related deficiencies the country’s continued political commitment had led to significant progress across a comprehensive CFT action plan.
It was reported that responding to additional deficiencies later identified in Pakistan’s 2019 APG Mutual Evaluation Report in June 2021, Pakistan provided further high-level commitment to address these strategic deficiencies pursuant to a new action plan that primarily focuses on combating money laundering. In this respect FATF mentioned that since June 2021, Pakistan has taken swift steps towards improving its AML/CFT regime and completed six of the seven action items ahead of any relevant deadlines expiring, including by demonstrating that it is enhancing the impact of sanctions by nominating individuals and entities for UN designation and restraining and confiscating proceeds of crime in line with Pakistan’s risk profile.
This time round the Stuck with FATF asked Pakistan to continue to work to address the one remaining item in its 2021 action plan by demonstrating a positive and sustained trend of pursuing complex [money laundering] investigations and prosecutions. In response Pakistani officials acknowledged that Pakistan now aimed to fully comply with the 2021 action plan on anti-money laundering and combating terror financing by the end of January 2023. It was pointed out that Pakistan had two concurrent action plans with a total of 34 action points, of which 30 had either been fully or largely addressed to curb money laundering and terror financing. The most recent action plan of 2021 on money laundering from the APG had largely focused on money laundering.
Interestingly, the completion of APG’s action plan for the effectiveness of AML/CFT is also a structural benchmark of the International Monetary Fund (IMF) for end-March. Recently, the IMF asked Pakistan to complete the last remaining item in the 2018 AML/CFT action plan on the effectiveness of terror financing investigations and prosecutions of senior leaders of UN-designated terrorist groups, and promptly address the deficiencies identified in the APG’s Mutual Evaluation Report under the 2021 action plan. It must however be borne in mind that Pakistan’s compliance on the technical side may have significantly improved but its effectiveness is still ranked as poor by the FATF. Moreover Pakistan’s growing tilt towards China — and recently Russia — is widening the gulf between the country and the West. It is now evident that completing all actions for effectiveness of the AML/CFT regime is a structural benchmark of the IMF deal underlines Pakistan’s weakening clout in Western capitals.
Interestingly, Stuck with FATF also placed UAE on money-laundering grey list implying that the wealthy Gulf state, which includes the freewheeling trade-to-tourism hub Dubai has joined the likes of Yemen, Syria and South Sudan. The resources-rich UAE has become a nexus connecting the Middle East, Europe, Central Asia and Asia. Dubai has the world’s busiest airport in terms of international passenger traffic, and one of the busiest sea ports. While the desert country has successfully diversified its economy rather than relying on oil, experts and international organisations have long criticised a failure to crack down on murky financial transactions.
UAE officials said they would strive to meet a list of requirements laid down by the taskforce, including increasing prosecutions and identifying sanctions evasion. They added that the UAE takes its role in protecting the integrity of the global financial system extremely seriously and will continue its ongoing efforts to identify, disrupt and punish criminals and illicit financial networks pledging robust actions and ongoing measures to secure the stability and integrity of the country’s financial system. TW

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