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FATF progress

January 12, 2019

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THE latest consultations between the Financial Action Task Force and Pakistani officials have, according to claims made by the Pakistani side as reported in the media, resulted in reasonable progress towards the country being removed from the FATF grey list later this year. If that is true, if the FATF does pronounce Pakistan’s efforts against money laundering and terrorist financing to be adequate, and therefore deserving of removal from its grey list, the current PTI-led government would have achieved a notable success. The months of February, May and September will be crucial for Pakistan quickly re-exiting the FATF grey list, where it was previously placed between 2012 and 2015. The concern has been that because Pakistan was put on the grey list again relatively soon after last being removed from it, FATF could take a harder line against Pakistan and perhaps even nudge the country towards the black list.

A report prepared by the Pakistani side ahead of the consultations with FATF in Australia this week have indicated the complexity of the task involved in meeting FATF criteria. Particularly emphasis was put on measures along the Pak-Afghan and Pak-Iran borders to curb money laundering and terrorism financing. In addition, nearly 1,200 transactions were identified in 2018 relating to terror financing and money laundering — that may appear to be a large number, but it is minuscule compared to the overall financial transactions in the country in any given year. Akin to finding a needle in a haystack unless sophisticated systems are put in place, the identification of suspect financial transactions requires the commitment of adequate resources, the building of institutional capacities, and vigilance and coordination. Similarly, Pakistan’s extensive borders with Iran and Afghanistan have historically been minimally governed spaces, a reality that has changed somewhat for the better in recent times — but what the state is combating along its borders with Afghanistan and Iran are entrenched smuggling, criminal and militant networks.

It is clear that the FATF demands in terms of combating money laundering and terrorist financing are significant. It is hoped that the organisation will evaluate Pakistan fairly and consistent with its approach to other countries. What is somewhat reassuring at this stage is that the Pakistani side appears to have finally grasped the gravity of the situation and is assembling a professional response. FATF demands require Pakistan to coordinate its action against a range of federal and provincial agencies and bodies. That onerous task has been potentially complicated by the arrival of a first-time federal governing party that is mired in political fights with the opposition. However, if the most recent consultations are an indication, the Pakistani side appears to have a greater grasp of the issues than before. Smart policy and continuity could help Pakistan achieve a quick turnaround with FATF.

Published in Dawn, January 12th, 2019