Islamabad    -   Asia Pacific Group on Money Laundering has issued an evaluation report showing Pakistan’s progress on compliance to the Financial Action Task Force (FATF) recommendations.

According to its Mutual Evaluation Report October 2019, Pakistan has completely, partially or largely complied to 36 of the total 40 FATF recommendations.

The FATF-style regional body in its report said that out of the all 40 recommendations, one is fully complied, 9 are Largely Complied, 26 are Partially Complied and four remain Non-complied.

In June 2018, Pakistan had made commitment to work with the FATF and the APG to strengthen its Anti-Money Laundering (AML)/ Financing of Terrorism (CFT) regime, and address its strategic counter-terrorism financing-related deficiencies by implementing a 10-point action plan.

The successful implementation of the committed plan and its verification by the APG is a prerequisite for the FATF to remove Pakistan from its grey list.

In October 2018, an APG team had come to Pakistan for onsite visit to assess the effectiveness of Pakistan’s AML/CFT regime under FATF methodology. The new APG evaluation report draws heavily on the report issued after that visit.

This report provides a summary of the AML/CFT measures in place in Pakistan at that time. It analyses the level of compliance with the FATF 40 recommendations and the level of effectiveness of country’s AML/CFT system, and provides recommendations on how the system can be strengthened.

Pointing out deficiencies in the system, the report says that country’s TF (terrorism financing) investigation agency, the FIA (Federal Investigation Agency), has a low level of TF risk understanding, while provincial police TF investigation departments (counterterrorism departments – CTDs) have a better understanding of those risks within their provinces. Punjab CTD, in particular, has a reasonable understanding of TF risks within Punjab province, it says.

Overall, the private sector has a mixed understanding of Pakistan’s ML/TF risks. Banks and exchange companies (ECs) have a better understanding of those risks and have taken some steps to integrate the National Risk Assessment (NRA) results into their internal risk assessments.

All non-bank finance institutions (NBFIs) have a limited understanding of ML/TF risks and are in the initial stages of implementing a risk-based approach. DNFBPs have a poor understanding of ML/TF risks and are yet to start implementing a risk based approach.

Five federal LEAs are designated to investigate ML consistent with their authority to investigate associated predicate crimes. ML prosecutions are undertaken by internal units within each of those authorities. Pakistan’s LEAs have undertaken 2,420 ML investigations, resulting in 354 prosecutions (primarily self-laundering cases). However, the current status of these cases is unclear.

In the period under assessment, Pakistan convicted only one natural person for self laundering related to corruption. Law enforcement efforts to address ML are not consistent with its risks.

Pakistan demonstrated a willingness to deprive criminals of their illicit proceeds and has measures in place to enable competent authorities to freeze, seize, and prevent dealing with property subject to confiscation. The numbers of seizures relating to certain predicate offences are promising, but no seizures of illegal proceeds relating to ML have occurred. Overall, the value of confiscated funds is not commensurate with ML/TF risk profile. In addition, the cross border cash declaration system is not effectively utilised to seize cash/BNI at the border.

Nacta has taken some steps aimed at improving TF coordination and integration with counter-terrorism strategies through the National Task Force on CFT and TF Sub-committee of Task Force. At the time of Oct 2018 visit, Pakistan proscribed 66 entities and approximately 7,600 individuals, but the public list on Nacta’s website included very limited identification information.

Recommendations

The report has recommended that Pakistan should take the following measures. Adequately identify, assess and understand its ML/TF risks including transnational risks and risks associated with terrorist groups operating in country. Significantly enhance the use of financial intelligence in ML/TF.

Improve asset confiscation commensurate with ML/TF risks including cross-border currency. Enhance the use of the TF offence commensurate with Pakistan’s TF risks, particularly the active targeting of terrorist groups.

Address technical deficiencies in legal framework for implementing TFS for terrorism/TF and TFS for PF. Improve implementation by all FIs and DNFBPs and monitor compliance by SBP and SECP.

Supervisor should issue revised AML/CFT regulations to rectify remaining technical deficiencies, and provide further guidance to REs on the new requirements.

Enhance enforcement actions against hawala/hundi, and undertake ML and TF investigations and prosecutions of hawala/hundi operators where appropriate.

Assess the ML/TF risks for all types of legal persons and legal arrangements. Continue to improve ability to consistently provide and seek timely MLA.