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FATF keeps Pakistan grey - Inside Financial Markets

FATF keeps Pakistan grey

– The News

Despite implementing 26 out of 27 action plans, the Financial Action Task Force (FATF) has placed six new points actions plan for finding out deficiencies in Mutual Evaluation Report (MER), binding Islamabad to comply with these two plans simultaneously in order to come out from the grey list.

“Pakistan will be de-listed from grey list on implementing both action plans and accomplishing on-site visits” the FATF President Marcus Pleyer said when asked about implementing two action plans for Pakistan during his online press conference from Paris on Friday.

Now Pakistan will have to implement seven points related to investigation and prosecution of those involved in terror financing and other six key points. Top official sources said that it was unfair to undertake two different processes against Pakistan simultaneously. Now Pakistan has made progress to graduate from FATF’s grey list after implementing 26 points out of 27 action plans, but now another fresh plan is placed to implement six more points to keep Pakistan into grey list at least for next one year. “It’s unfair treatment,” said the official sources.

The FATF president said that since June 2018, when Pakistan made a high-level political commitment to work with the FATF and APG (Asia Pacific Group) to strengthen its AML/CFT regime and to address its strategic counter-terrorist financing-related deficiencies, Pakistan’s continued political commitment has led to significant progress across a comprehensive CFT action plan.

The FATF recognises Pakistan’s progress and efforts to address these CFT action plan items, and notes that since February 2021, Pakistan has made progress to complete two of the three remaining action items on demonstrating that effective, proportionate and dissuasive sanctions are imposed for TF convictions and that Pakistan’s targeted financial sanctions regime was being used effectively to target terrorist assets.

“Pakistan has now completed 26 of the 27 action items in its 2018 action plan. The FATF encourages Pakistan to continue to make progress to address as soon as possible the one remaining CFT-related item by demonstrating that TF investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups,” the FATF president said.

In response to additional deficiencies later identified in Pakistan’s 2019 APG Mutual Evaluation Report (MER), Pakistan has made progress to address a number of the recommended actions in the MER and provided further high-level commitment in June 2021 to address these strategic deficiencies pursuant to a new action plan that primarily focuses on combating money laundering.

Pakistan should continue to work to address its strategically important AML/CFT deficiencies, namely by: (1) enhancing international cooperation by amending the MLA (Mutual Legal Assistance) law; (2) demonstrating that assistance is being sought from foreign countries in implementing UNSCR 1373 designations; (3) demonstrating that supervisors are conducting both on-site and off-site supervision commensurate with specific risks associated with DNFBPs, including applying appropriate sanctions where necessary; (4) demonstrating that proportionate and dissuasive sanctions are applied consistently to all legal persons and legal arrangements for non-compliance with beneficial ownership requirements; (5) demonstrating an increase in ML investigations and prosecutions and that proceeds of crime continue to be restrained and confiscated in line with Pakistan’s risk profile, including working with foreign counterparts to trace, freeze, and confiscate assets; and (6) demonstrating that DNFBPs are being monitored for compliance with proliferation financing requirements and that sanctions are being imposed for non-compliance.

Pakistan’s Ministry of Finance in its response of FATF decision stated that FATF discussed Pakistan’s progress report on 2018 action plan and Post Observation Period Report (POPR) in its virtual plenary held on February 23, 2021. Pakistani delegation under the lead of Minister Muhammad Hammad Azhar attended this virtual FATF plenary. The plenary discussion on Pakistan focused on three main areas; Pakistan’s Technical Compliance, ICRG action plan and Post Observation Period Report (POPR).

On Technical Compliance, FATF appreciated Pakistan’s commitment and efforts in seeking upgrades in a number of recommendations and expected that Pakistan would continue same momentum.

Regarding 2018 action plan, the FATF recognised considerable progress made by Pakistan on action plan and Pakistan’s high-level commitment. Pakistan has now completed 26 of the 27 action plan items. The FATF, after discussion, decided to retain status quo for Pakistan i.e. countries in increased monitoring for 2018 TF action plan, for remaining one action plan item. Pakistan is confident that the remaining action item would be completed before FATF’s next plenary scheduled in October 2021.

In relation to POPR, FATF acknowledged Pakistan’s significant progress and continuation of Pakistan’s high-level commitment. A total of 82 deficiencies were highlighted in Pakistan’s 2019 MER which were included in the POPR as 67 recommended actions in 11 IOs, on which Pakistan reported progress. As a result of the progress made since the MER 2019, the FATF approved a 7 points ML centric action plan to be implemented by Pakistan. Pakistan has already provided its political commitment to FATF for implementation of the new action plan.

During FATF plenary, there was a broader consensus on Pakistan’s continued efforts and progress on implementation of TF action plan as well as MER recommended actions. There was a complete consensus among the membership regarding Pakistan’s unprecedented achievements in FATF, the statement concluded.

Syed Zaki Hussain

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