WASHINGTON: Pakistan could be in trouble for not doing enough to prevent militant groups from raising funds inside the country, warns a report of the US State Department.

The report — titled “Country Reports on Terrorism, 2016” — recognises Pakistan as “an important counterterrorism partner” but has also listed it among countries that provide safe havens to terrorists.

The State Department sent the report to Congress on Wednesday, as part of its annual assessment of terrorism across the world.

The Congress-mandated document acknowledges that violent terrorist attacks inside Pakistan have continued to decline but also blames Islamabad for failing to prevent cross-border attacks.

In a separate chapter on money laundering, the report notes that Pakistan is a member of the Asia Pacific Group on Money Laundering, a regional body modelled on the Financial Action Task Force (FATF).

FATF is an intergovernmental organisation founded in 1989 to develop policies to combat money laundering. In 2001, it expanded its mandate to act on terrorism financing.

FATF and its regional affiliates monitor the various countries’ progress in implementing its recommendations by mutual evaluations of member countries, known as ‘peer reviews’.

The US report notes that Pakistan criminalises terrorist financing through a law known as the Anti-Terrorism Act. But it points out that “there has not been a significant number of prosecutions or convictions of terrorist financing cases reported by Pakistan in recent years due to a lack of resources and capacity within investigative and judicial bodies”.

The report says that in 2015, FATF removed Pakistan from its review process due to progress on countering the financing of terrorism. But countries in review can also be declared facilitators of terrorism financing if they fail to satisfy member states.

The report points out that in October 2016, FATF noted “concern among members that Pakistan’s outstanding gaps in the implementation of the UN Security Council ISIL [the militant Islamic State group] and Al Qaeda sanctions regime had not been resolved, and that UN-listed entities — including Lashkar-e-Taiba (LeT) and its branches — were not being effectively prohibited from raising funds in Pakistan”.

Despite Pakistan’s CFT (Combating Financing of Terrorism) laws, “LeT and its wings continued to make use of economic resources and raise funds in the country in 2016. Pakistan’s ban on media coverage also did not appear to reduce the ability of LeT to collect donations”.

The report, however, recognises that from March 2015 to March 2016, Pakistan did freeze several bank accounts operated by various terrorist groups and also made “other limited efforts” to stem fundraising by LeT and its affiliates.

The report acknowledges that Pakistan’s national action plan to fight terrorism includes efforts to prevent and counter terrorist financing, including by enhancing interagency coordination on CFT.

Pakistan’s National Terrorists Financing Investigation Cell — operated by the Federal Investigations Agency, Federal Board of Revenue, State Bank of Pakistan and intelligence agencies — tracks financial transactions between the national and international banking systems. Additionally, Nacta coordinates with all relevant agencies to counter terrorism as well as terrorist financing.

The Anti-Money Laundering Act of 2010 designates the use of unlicensed hundi and hawala systems as offences and also requires banks to report suspicious transactions to Pakistan’s financial intelligence unit, the State Bank’s Financial Monitoring Unit. But the report complains that while unlicensed hawala operators are illegal in Pakistan, these unlicensed money transfer systems persist throughout the country.

Published in Dawn, July 21st, 2017

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