Second, FATF expanded its territorial work by forming regional groups so that it is now a global regime. Pakistan was assigned to Asia Pacific Group, where Australia and New Zealand are also members.
Third, FATF has developed standards called Recommendations voluntarily adopted by members. After 9/11, the FATF was assigned the additional responsibility of countering financing for terrorism (CFT), and more recently to prevent financing for proliferation of weapons of mass destruction.
Finally, FATF and its regional groups work closely with member countries in a cooperative fashion. The deficient jurisdictions are required to make up their deficiencies within a given time framework.
Pakistan developed its AML regime through an Ordinance in 2007, which was subsequently made into an Act in 2010. To develop a new criminal regime was not an easy task and we faced numerous difficulties, just as has been the case in several other jurisdictions. But Pakistan's slow progress in removing the deficiencies eventually led to its placement in the monitored jurisdictions or the so-called 'grey list' in 2012.
The key deficiency at the time was terrorist financing together with a number of shortcomings in the AML regime, including exclusion of many predicate offenses that should carry the offense of money laundering most notably fiscal offenses. At the start of its term, the present government took some serious steps to remove the country from the grey list. Since then, barring a sticking issue (discussed later), the country has worked hard to strengthen the regime, aided by National Action Plan (NAP) made in December 2015.
What happened at the FATF meeting in Paris, unfortunately, is the result of international politics. Indeed, it is sad to see how a forum dedicated to enhance the integrity of financial systems from the ills of money laundering and terrorist financing is used by some powers for purposes not in consonant with the aims and objectives of FATF. The business of FATF is serious and sombre. It should not be reduced to the politics played at the UNSC. India is a member of FATF and frequently uses its proximity to the US to pose undue challenges for Pakistan. The Indian-US combine again worked against Pakistan in Paris.
It an unprecedented move, before the FATF meeting, the US State Department held a press conference disclosing its resolve to present a resolution for placing Pakistan in the terror financing watch list for its failure to reign in Jamaat-ud-Dawah (JUD) and Falah-i-Insaniyat (FIF) in pursuance of the UNSC Resolution 1267. The hype and frenzy generated by this message was scary. International media, especially Indian, ran stories of doom and gloom falling on Pakistan in the aftermath of the FATF designation. But we were no less responsible in bringing about this unpleasant spotlight. At least two major faux pa were committed. First, the Ordinance we issued a few days before the Paris meeting, even though a correct step, was ill-timed and was thus construed a half-hearted effort.
Second, and perhaps more importantly, there was a premature announcement from a high government official that Pakistan has survived the challenge with the help of friends such as China, Saudi Arabia, Turkey and the UAE, who voted down the US proposal of placing Pakistan on the Watch List. Understandably, those who had earlier agreed to take a sympathetic view of Pakistan's progress and showed readiness to give more time for the results of new steps to emerge, were outraged on such an audacious claim from Pakistan. No amount of regret and consolation, afterward, was good enough. Under the circumstances, strong-arm tactics were deployed to steam-roll the outcome. Pakistan's Advisor Finance, who was leading Pakistan's delegation, was at pain to say to the Reuters: Washington did not seem genuinely eager to see Pakistan boost its terrorist financing regulation and was instead bent on humiliating the country.
It is not clear, so far, what has finally transpired in the meeting, as the public statement issued by FATF after the plenary has no mention of Pakistan. In many interviews, the Advisor has suggested that Pakistan should consider itself in the Watch List and that an action plan would be developed with the help of members from APG and International Cooperation for Review Group (ICRG). This is not the best thing that has happened to Pakistan, but this is also not a calamity fallen on the country.
At the outset, it may be underlined that Pakistan has an AML-CFT regime that is comparable to international best practices. The FATF Statement in February 2015 had following to say when removing Pakistan from the grey-list: The FATF welcomes Pakistan's significant progress in improving its AML/CFT regime and notes that Pakistan has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in June 2010. Pakistan is therefore no longer subject to the FATF's monitoring process under its on-going global AML/CFT compliance process. Pakistan will work with APG as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report, in particular, fully implementing UNSC Resolution 1267.
The Resolution 1267 has been a big challenge for Pakistan. However, here also we made significant progress as we expanded the list of proscribed entities (60) individuals (8000 plus) including those from the UN and froze their bank accounts. The case of JUD-FIF has posed complex challenges. The evidence against them is scant. The US has announced a bounty on Hafiz Saeed and he has been put behind bars many a time in the past but has been released by Courts, including the Supreme Court. However, in January, 2018 JUD and FIF were placed on the list of proscribed organizations under the Anti-Terrorism Act (ATA), 1997. The ATA was further amended to automatically include all those listed in the UNSC 1267. Additionally, the Cabinet also approved the Anti-Terrorism (Freezing and Seizure) Rules, 2018 enabling the authorities to freeze and seize assets outside the financial sector also and other required restrictions. Some actions were taken against FIF - stopping them from collecting donations, running charitable organizations, providing ambulance services, etc., which have been taken under government administration - a key American demand. The challenge would be to defend these actions in the court of law as the ATA Act provides appeal and review provisions.
We agree with the Advisor that this development would not have any adverse implications on the economic outlook of the country. Yet, it tarnishes our image and is inconsistent with the efforts we have expended in introducing a robust AML-CFT regime in Pakistan. It is also a positive development that in the backdrop of this unpleasant episode, Ms Lisa Curtis, Director, NSC, has visited Islamabad. When the passions cool down, it would be time to reengage off-line with the US to allow them to examine the steps we have taken that would indeed go a long way to dispel their misgivings. Similarly, other friendly countries should also be taken into confidence. The Chinese Foreign Office statement should help clarify the apprehensions about its unflinching support for Pakistan.
(The writer is former finance secretary) [email protected]