Pakistan rating on FATF anti-money laundering recommendations improves

Islamabad: Pakistan’s rating on the technical recommendations of the Financial Action Task Force (FATF) has improved according to the latest report by Asia Pacific Group (APG) on Money Laundering. However, the country’s status is retained on ‘Enhanced Follow-up’ for additional requirements.

Pakistan has achieved compliant or largely compliant ratings in 31 out of 40 FATF technical recommendations according to the report published on June 2. As a result of the substantial progress, APG has decided to move Pakistan “from enhanced (expedited) to enhanced follow-up” and said that the country “will continue to report back to the APG on progress to strengthen its implementation of anti-money laundering and combating financing terror (AML/CFT) measures.”

The finance ministry welcomed the improved ratings and said the results prove the government’s sincerity along with its resolve in complying with FATF requirements. “These results are also a manifestation of the irreversibility and sustainability of the complete process in bringing Pakistan at par with global AML/CFT standards.”

'Unprecedented'

Minister Hammad Azhar, who is the head of the task force on FATF, said the improvement in 21 recommendations within this short period of time “remains unprecedented in FATF history for any country”. The outcome, he said, was the result of major legal reforms, at least 14 federal and three provincial laws with corresponding regulations. He also lauded the efforts of the FATF team including 20 ministries and other organisations.

FATF’s mutual evaluation report (MER) of jurisdictions is assessed in two domains: technical compliance/legal instruments (40 FATF Recommendations) and demonstration of effectiveness (11 immediate outcomes). Pakistan’s MER was adopted in October 2019 in which it was rated compliant and largely complaint in 10 out of 40 FATF action points, the official statement said.

Since then, Pakistan carried out major legal reforms with the enactment of 17 laws along with relevant rules and regulations. “The laws not only strengthened the systems in Pakistan but also brought in the sustainability.”

The reporting date for the latest evaluation was October 1, 2020, which implies Islamabad may have made further progress. Pakistan has submitted re-rating requests to APG on four more recommendations in the next follow-up report, which are currently under review.

“Overall, Pakistan has made notable progress in addressing the technical compliance deficiencies identified in its mutual evaluation report (MER) and has been re-rated on 22 recommendations,” the APG said.

Why was Pakistan placed on grey list?

Pakistan was placed in June 2018 on the FATF’s grey list that comprises of countries under increased monitoring by the watchdog due to flaws in their financial regulations. In February 2021, FATF announced “significant progress” by Pakistan but decided to keep the country on its grey list until the plenary session in June 2021.

During the last three years, Pakistan amended at least 15 laws particularly the Anti-Terrorism Act and the Anti-Money Laundering Act, and implemented various legal and administrative actions to address FATF concerns.

Experts believe it is critical for Pakistan to undertake “large scale capacity building endeavours in AML/CFT” for all justice sector actors across the country along with targeted action and law making for the implementation of FATF Recommendations.

“Despite enhanced AML/CFT frameworks, implementation and effective measurement of results is critical in gauging the success of new laws and policies, as well as in conveying Pakistan’s progress to the FATF and other international bodies” according to he latest report by Pakistan-based Research Society of International Law (RSIL) which calls for improving the criminal justice system and introducing special investigative techniques that goes beyond traditional ocular testimony and confessions.