Significant improvements in fight against money laundering, terror financing – Newspaper

ISLAMABAD: Despite being in the category of "Enhanced Monitoring" by the Asia Pacific Group (APG) in August this year, Pakistan made significant improvements in its systems to combat money laundering (LD) and terrorist financing (TF) as per international standards

A Mutual Evaluation Report (MER) published here Sunday by APG, a regional affiliate of the Financial Action Task Force, showed that Pakistan failed to comply with four of the 40 recommendations of the APG on the effectiveness of anti-money. system of washing and combating the financing of terrorism (AML / CFT).

Pakistan's performance-based report to October 2018 showed that the country fully complied "only" in an aspect related to the secrecy laws of financial institutions. It was found that "partially complied" with 26 recommendations and "largely complied" with nine others.

The APG report shows that Islamabad is "non-compliant" in four, "partially compatible" in 26 and "largely compatible" in nine of 40 recommendations

The report comes one week before the FATF review meetings in Paris (October 13-18) that would determine whether Pakistan should remain or leave the gray list or be blacklisted.

The 41-member APG adopted the 3rd MER in Pakistan during the meetings from August 13 to 18 in Canberra, Australia, and downgraded the country to the category of "Improved monitoring" due to technical deficiencies to meet normal international financial standards for October of 2018. As a result, Pakistan must now submit quarterly, rather than bi-annual, progress reports to the APG, beginning February 1, 2020 to show improvements in its technical standards on AML / CFT.

The report said that Pakistan had assigned a national risk rating of "medium" for both LD and TF, but its national risk assessment lacked a thorough analysis. He said the authorities had different levels of understanding of the country's ML and TF risks, and the private sector had a mixed understanding of the risks.

"While Pakistan has established a multi-agency approach to implement its AML / CFT regime, it is not implementing a comprehensive and coordinated risk-based approach to combat ML and TF."

The report says that Pakistan was using financial intelligence to combat ML, FT and predicate crimes and to track property for purposes of confiscation, but only to a minimum extent. Critically, the Financial Monitoring Unit (UNF) could disseminate information and the results of its analysis spontaneously or upon request to the provincial anti-terrorism departments (CTD). To a minimum degree, CTDs were accessing FMU information and financial intelligence during TF investigations, but only with the permission of the court.

Pakistan's law enforcement agencies (LEA) conducted 2,420 investigations of ML, which resulted in 354 prosecutions (mainly cases of money laundering) and the conviction of a natural person for money laundering related to corruption. The proportionality and deterrence of the sanction against natural persons could not be assessed due to lack of information. Pakistan's police efforts to address the LD are not consistent with its risks.

The LEAs have measures to freeze, seize and avoid the treatment of goods subject to confiscation. They are seizing some assets in cases of predicate offenses, but not in cases of ML and the value of the confiscated funds did not match Pakistan's risk profile. Its cross-border cash declaration system was not effectively used to confiscate cash at the border.

"Pakistan faces a significant threat of TF," the report said, adding that the country had registered 228 cases of TF and had convicted 58 people. The vast majority of investigations and all convictions were obtained at the provincial level, including 49 convictions in Punjab. A total of nine FT convictions for all other provinces are not consistent with the specific FT risks of each province.

Pakistan gave UNSCR 1267 internal effect by issuing the Statutory Regulatory Order (SRO), but despite recent improvements, there were numerous cases in which SROs were not issued "without delay"; There are other technical deficiencies. Pakistan has banned 66 entities and approximately 7,600 individuals under the Anti-Terror Law under UN resolutions.

No funds or assets owned by such organizations have been frozen. The coordination, review and follow-up committees of the resolutions of the United Nations Security Council on anti-proliferation activities are mainly related to the fight against proliferation activities. The State Bank of Pakistan and the Pakistan Securities and Exchange Commission are conducting a general supervision of the TFs, but no actions focused exclusively on the specific TFs of the province were demonstrated.

Most banks and larger exchange companies have an adequate understanding of their AML / CFT obligations and have conducted internal risk assessments of ML / TF, which underpin a reasonable understanding of the client's ML risk, but not of the risk of TF.

The report says that the State Bank did not have a clear understanding of the risks of ML and TF exclusive to the sectors it supervises. It is improving its understanding and is implementing a risk-based approach, which includes the performance of periodic AML / CFT monitoring activities on site and thematic.

In addition, Pakistan had limited mitigation measures for legal persons and there is no supervisory supervision for AML / CFT purposes. There are no measures in place to address the risks of ML and TF posed by trusts, including foreigners, in Pakistan. The country also did not have a formal framework for mutual legal assistance.

Posted on Dawn, October 7, 2019