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Pakistan added to FATF Grey List

International Compliance Association

AML , Big Comp Convo , FATF

At the Financial Action Task Force (FATF) plenary meeting in February 2018, a decision was made to add Pakistan to the FATF list of high-risk and other monitored jurisdictions, known also as the ‘grey list’, for failing to do enough to counter the financing of terrorist groups.

 

The FATF’s International Cooperation Review Group (ICRG) identified four key areas of concern in respect of Pakistan, highlighting deficiencies in the:

  • supervision and enforcement of anti money laundering (AML) and countering the financing of terrorism (CFT) regimes
  • illicit cross-border movement of currency by terror groups
  • progress in terror financing investigation and prosecution, and
  • implementation of the UN Security Council resolutions 1267 and 1373 for curbing terror financing.

 

In June 2018, Pakistan responded to being added to the list by committing itself to a 26-point action plan, to be implemented over a 15-month period. The plan will require the Pakistani authorities to cooperate with other countries to stem the financing to terror groups like Lashkar-e-Taiba, Jamaat-ud-Dawah, Falah-e-Insaniyat Foundation, Jaish-e-Mohammed, Islamic State, al-Qaeda, Haqqani Network and the Taliban.

 

Pakistan FATF 

 

Pakistan will work to implement its action plan by:

 

  1. demonstrating that terrorist financing (TF) risks are properly identified, assessed, and that supervision is applied on a risk-sensitive basis;
  2. demonstrating that remedial actions and sanctions are applied in cases of AML/CFT violations, and that these actions have an effect on AML/CFT compliance by financial institutions;
  3. demonstrating that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services (MVTS);
  4. demonstrating that authorities are identifying cash couriers and enforcing controls on illicit movement of currency and understanding the risk of cash couriers being used for TF;
  5. improving inter-agency coordination including between provincial and federal authorities on combating TF risks;
  6. demonstrating that law enforcement agencies (LEAs) are identifying and investigating the widest range of TF activity and that TF investigations and prosecutions target designated persons and entities, and persons and entities acting on behalf or at the direction of the designated persons or entities;
  7. demonstrating that TF prosecutions result in effective, proportionate and dissuasive sanctions and enhancing the capacity and support for prosecutors and the judiciary; and
  8. demonstrating effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services;
  9. demonstrating enforcement against TFS violations including administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases;
  10. demonstrating that facilities and services owned or controlled by designated persons are deprived of their resources and the usage of the resources.

 

Pakistan will begin implementing its action plan immediately, by methodically addressing the concerns raised. For example, by January 2019, it will identify and assess domestic and trans-national terror financing risks and improve coordination between the country’s federal and provincial authorities. Also by January, it will begin financial inquiries of terror groups and their members, looking at their activities around the collection, movement and use of funds.

 

Within six months it will make sure that the nature of risks of cash couriers being used for terrorist financing are properly tackled.

 

Within twelve months, Pakistan will look to have in place risk assessment-based guidelines that will address their inability to freeze the property of UN-designated groups, and will make sure they apply administrative sanctions against all UN terrorist groups.

 

By September 2019, they expect to have delivered on the completion of the action plan.

 

Of course, there’s a lot of work to get through in a short space of time, but it’s encouraging to see Pakistan has articulated a workable plan that will align its AML and CFT controls with FATF requirements, and which should provide some much-needed structure to a part of the world that has, historically, seen high levels of terrorist financing activity.

 

Further reading

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