Pakistan takes FATF seriously

2018-04-10T23:39:48+05:00 Dr Kamal Monnoo

The above is exactly what the Pakistani government needs to convey quickly and clearly to the developed world and that too with a degree of certainty and honesty, if we are to avoid being black-listed in the upcoming June session of the FATF (Financial Action Task Force). Essentially, Pakistan needs to prepare a comprehensive plan to eradicate terrorist financing by June 2018, and even more importantly someone (preferably a professional from the financial management field) has to take charge with full backing of all institutions and power centers of the country. No point in mere lip service on the television talk shows by the prime minister or his finance team that all terror financing and money laundering concerns originating in or from Pakistan have been addressed and come June, there is nothing to worry about! What it will in effect entail is that Pakistan will have to follow the same process that it did in 2015, albeit this time with more thorough measures because the friends of yesteryears may no longer be with us. To start with an action plan is to be submitted to the FATF by May 2018, and if the FATF approves our action plan in June, it will make a formal announcement to accept to retain us on the grey list, from where we will then be allowed a prescribed timeframe to work our way out from of this grey list. However, should Islamabad fail to submit an action plan, or if the FATF does not accept our plan (meaning we are not able to convince them of the efficacy of our proposals and actions), the group is likely to proceed to then instead place Pakistan on its black list, along with North Korea and Iran. Now, we do not have Iran’s natural resources at our disposal to be able to survive and at the same time would also not like to end up like North Korea either!

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As we know the FATF (comprising of 37 nations) in its Paris plenary meeting in February 2018, placed Pakistan on a watch list of the countries where terrorist outfits are still allowed to raise funds. So, now in its natural course it will see Pakistan being placed on either the grey list from June onwards or be instead relegated further to the black list; that is, if in June 2018, Pakistan fails to provide enough evidence that it is doing what is necessary to address the wish list handed over to it by the FATF in February – meaning the FATF’s identified “jurisdictions with strategic anti-money laundering/countering the financing of terrorism deficiencies” will have to be agreed upon and an action plan will have to be set in motion with the oversight of FATF. Following which the FATF will carry out an in-depth study of the financial system of Pakistan – known as “mutual evaluation” – as part of the process to avoid black listing. Also, before June, Pakistan has to work out the details of this evaluation process, because if it does not do so then automatically the next process will come into force whereby Pakistan will be pushed straightaway on the blacklist of willful violators. It requires no doctoral dissertation to figure out that if Pakistan is indeed placed on the blacklist the financial and economic consequences would be grave. We fill find ourselves quickly de-linked with the global economy; free flow of financial and banking transactions will come to a halt; international financing both for the private and public sectors will become inaccessible; trade and exports will take a jolt; and last but not least, the Pak rupee could just go into a free fall. And as the reality check quickly dawned on us in February, even the so-called good friends like Saudi Arabia, Turkey, UAE and China will not be of much help.

China by the way of late has immense problems of its own at a time when it is trying to combat a wave of American and Western tariffs and protectionism policies, and seems quite busy cum locked up in a fierce fight to save its economy from entering a recessionary mode. In a situation like this, one doubts if it would have the will or the desire to singularly stick its neck out for Pakistan. As for Saudi Arabia, the less said the better.

It is important that when preparing our defense the action plan should not be politically motivated. Meaning, banking on mere foreign policy initiatives or sheer support from our perceived friends is only one element and that too perhaps a very minor one at this stage. Also, no need to play the victim syndrome as if the world is against us, but to instead focus on all the weaknesses and financial discrepancies as being pointed out by the FATF. The action plan and the subsequent engagement with FATF, in order to convince it of our seriousness and of our resolve to be a genuinely compliant part of the larger global community, will require deft and professional handling. Further, care must be taken that institutional shenanigan at home should be avoided: Courts should avoid passing judgments, which at this stage could hurt Pakistan’s chances at the FATF – romantic notions like independence of the judiciary, sovereignty, etc. can wait for later – and the government should refrain from passing any bills or ordinances (at this rather late stage of their tenure) that do not find positive traction with the FATF. We know that only last week the FATF has written to the Pakistan government raising concerns about its newly announced tax amnesty scheme, which according to the FATF has been announced without seeking its prior approval.

Lastly, from Pakistan’s perspective, the timing of the upcoming June session could not have been worse. It will be a period of uncertainty here in Pakistan where only an interim government will be in-charge and God forbid if anything goes wrong, no one will own up to the responsibility and as usual, a politically motivated blame game will be un-leashed, which post-event can do precious little to un do damages. This is why all the more reason, that it is crucial to Pakistan’s chances that all stakeholders in power immediately get together to appoint a professional body led by a competent but independent person of related competence to see to it that our case is presented and defended professionally at the FATF in June. Also, there should be clear instructions that all related governmental departments (foreign office, ministry of finance, FBR, State bank, etc.) will have to lend their utmost cooperation to this apex body. Trust me, failure is not an option!

 

The writer is an entrepreneur and economic analyst.

kamal.monnoo@gmail.com

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