After the completion of the FATF plenary the news was finally broken and ultimately after a lapse of days it was confirmed by Foreign Office, that Pakistan will be placed on the ‘grey-list’ by FAFTA in June, 2018. Based on reports Pakistan will submit its new action plan in May. Will Pakistan be able to avert being designated, is yet to be seen. However, what it can certainly do is not wait for another crisis to culminate.
The hour of the need demands an honest introspection and setting of its course in order. The sad truth remains that relevant government institutions, private entities and media only started reporting on anticipated fears more than a week before the plenary. The government sprang into action with combination of legislative and executive measures to make progress at the eleventh hour. Despite the best of intention, it only managed in averting the worst for the time being.
The way forward demands an intensive drive at home by the Government. At present Pakistan has Anti-Money Laundering Act, 2010. The law was amended again in 2016. It outlines a number of executive and legal measures (along with criminal penalties) to stifle money laundering and combating financing of terrorism. Consequence of this act, the government is mandated to hold two bi-annual meetings of National Executive Committee (NEC) on Anti-Money Laundering (AML). Regretfully, last, and 9th NEC on AML was held on August, 2016. Surprisingly enough, then Finance Minister, Ishaq Dar, convened the meeting to review country’s progress for Mutual Evaluation in 2018. The little follow up after that suggests lack of seriousness on government’s part.
However, the ongoing challenge should bring out the best from relevant domestic stakeholders. The Government needs to commit an integrated approach to prevent the anticipated crisis, despite country preparing for an election year. The government has a serious obligation before itself. Pakistan needs to build a stronger case. To this end, the government should articulate policy plan of issuing annual national progress report on AML/CFT measures, the latter is articulated under Section 6 subsection (4) clause (g) of AML Act, 2010. Besides introducing Anti-Terrorism Ordinance, 2018, the government could introduce specific legal measures to toughen the existing AML Act, 2010 to curb abuse of financial systems. So far under AML Act 2010, only one section deals with terror financing, i.e. Section 7, clause (d). Laws on countering terror financing can be widened by including array of modus operandi employed for terror-financing. Moreover, laws to regulate block chain and cryptocurrencies need to be introduced to counter money laundering and terror financing efforts by malicious actors.
Similarly, the government needs to direct Financial Monitoring Unit of State Bank to upscale its actions in scuttling suspicious financial activity, including action against all such account holders. Moreover, given provision of international cooperation under AML Act, 2010, the FMU along with intensifying such cooperation needs to maintain a transparent, updated public report of its progress. Following on, the governments needs to prepare a comprehensive plan for incrementally building cooperation and capacity of its regulators, judges and investigators under FATF training programs. This will significantly aide in accomplishing an improved criminal justice system to tackle money laundering and financing of terrorism and work to accomplish most action points to be revised under next Mutual Evaluation by FATF.
Pakistan’s financial regulators and Ministry of Foreign Affairs should jointly facilitate collaboration with countries having strong credentials to replicate and contextualise best practices in Pakistan’s financial regulation. Similarly, regulation mechanisms with drastic outcomes can be adopted with incremental approach. However, they will need a clear timeline in place for their implementation.
Moreover, rather than adopting a crisis-management response, Pakistan needs a strategic approach. Regulation measures need to be outlined on basis of immediate, short and long-term goals and action plans. Their introduction will certainly need a serious attitude from Ministry of Finance to follow-up with progress. As this will help in not losing sight of the crucial goals, which is clear from foregoing example of Government not holding requisite number of NEC meetings on AML since 2016. On a positive note, Government’s decision to adopt innovative solutions under FinTech by mid – 2018 will help bring convenience and regulate financial transactions.
There are several reasons for Pakistan to make systemic changes. The first being Pakistan was extended with an additional GSP Plus status for two years. For business community to benefit and additional Foreign Direct Investment to flow in, the government will need to address these discrepancies. Moreover, the ongoing regional environment doesn’t permit Pakistan to move any step closer to being isolated.
Lastly, it was our failure at diplomacy to engage and retain not just our traditional partners, but also United States from moving the resolution. It also demonstrated lack of proactive intervention. And the foregoing plenary, validated the argument that by engaging China, United States is likely to influence Pakistan. Other than bringing the changes at home, Pakistan needs aggressive diplomatic over drive. It needs intensive diplomacy to consistently engage most importantly United States, China, the big three European countries (Germany, France and the U.K.), the Asia Pacific Group member countries and the GCC bloc about its policy and action plan on AML/CFT. Despite being a tough call, it is not an impossible feat. Only Pakistan’s actions can help it create the most credible narrative and preserve its national interest.