THE Financial Action Task Force’s meetings are bookended by much hysteria within and outside Pakistan. Grey list and black — and now our next-door neighbours are discovering shades of grey where none existed earlier. So where the Asia Pacific Group (APG) had also reportedly ‘found’ a grey list to add Pakistan to, the latest FATF meeting led one neighbouring media outlet to ‘discover’ a dark grey list. Soon enough, there will be a charcoal grey or misty grey list for Pakistan’s convenience or inconvenience.
But the sensationalism is unfortunate, for it draws attention away from the painstaking process the country needs to go through to come off the list. Earlier this month, an APG report was released on the progress Pakistan had and hadn’t made. It was compiled by a number of experts who visited the country last year from Oct 8 to 19.
The 200-page report makes for tedious reading but it shows that FATF objectives are not limited to laws and their implementation but also to the capacity to improve our law-enforcement agencies and ensure convictions; the use of alternative methods where convictions are not possible and spreading awareness and having rules for fields which currently function without any.
This will take time and work. For instance, the report points out that while there may be national coordination among the various law-enforcement agencies there is little cross-CTD (counterterrrorism departments which exist at the provincial level) or cross-provincial coordination. So, the FIA hardly coordinates with the Punjab CTD, for example, or the Financial Monitoring Unit (responsible for collecting and analysing reports of suspicious transactions generated by banks and other institutions) does not coordinate with provincial CTDs. Hence, the provincial CTDs can only access information available to the FMU with the court’s permission but cannot do so during an inquiry.
The sensationalism draws attention away from what the country must do in order to come off the FATF list.
The CTDs’ capacity across the provinces varies greatly, with Punjab having done the most to build capacity. This means that the latter has the most understanding of terrorism financing (TF). For example, the report indicates that in 2018, the Punjab CTD requested the FMU for information on 26 occasions, and the Sindh CTD only once. There are no figures for KP or Balochistan, presumably because their CTDs didn’t send any requests to the FMU. It seems that apart from Punjab, the other CTDs tend to focus on the security aspect of terrorism — “...the use of financial investigations in TF investigations is very limited”.
The report argues that law-enforcement agencies cannot differentiate between a terrorist act and terrorism financing and how there is little effort to investigate the funding of terrorist acts across provincial borders. This limited understanding of terrorism financing is also revealed by figures in the report. Of the suspicious transaction reports analysed by the FMU, only 5.5pc were passed on to the relevant authorities as related to terrorism or terrorism financing. In comparison, 23pc were suspected of being related to tax evasion and 9.5pc to corruption.
Of equal concern is an issue which has been highlighted time and again — the capacity of law-enforcement agencies to successfully prosecute and ensure convictions. This is brought home by some of the statistics in the report. The figures provided for the last five years show that ANF, FIA, FBR and NAB were able to ensure only one conviction for money laundering; of 161 prosecutions, ANF was able to secure nil convictions; FIA also prosecuted 175 cases to secure no conviction; NAB managed one out of four and FBR zero out of 14.
The report states: “One conviction is not consistent with Pakistan’s risk profile … the collection of insufficient evidence, ineffective use of investigative tools, the delays at trial stage, and the low levels of awareness … of the offence by the judiciary are the main grounds for the disproportion among the figures of investigation, prosecution and conviction as well as not achieving a reasonable conviction rate.”
The record on terrorism financing is no better. Overall, the country has registered 228 terrorism-financing cases in five years and convicted 58 individuals. All this was done at the provincial level.
Apart from the convictions, the provincial CTDs have confiscated over $100,000 over five years. However, it is suggested that this amount is not impressive considering the extent of the problem in Pakistan. But the report notes a commitment to fighting terrorism and how 30pc of terrorism-financing cases were registered between March and October 2018.
The problem though is not just one of the state’s capacity; it is also about the absence of knowledge in society.
Another issue highlighted by the report is the lack of awareness about terrorism financing or money laundering in sectors other than banks. Here it talks specifically of non-banking financial institutions such as currency exchanges or insurance firms as well as designated non-financial businesses and professions (DNFBP) which can include real estate, gems and precious metals. These two sectors, according to the report, can be used for both money laundering and terrorism financing but those involved in the two categories, especially the second one, have no awareness of the issue.
So, for instance, where banks have rules and regulations in place to vet those who want to open accounts and the FMU has been established to raise a red flag on suspicious transactions, few of the latter are reported by other sectors.
According to the breakdown provided in the report, up to June 2018, commercial banks filed over 70pc of the suspected transaction reports with the FMU; exchange companies in one category filed 25pc while DNFBP filed 0pc. This shows that the issue is not as simple as having laws in place but also requires raising awareness and changing the way private-sector companies work.
There is an equally lengthy section on charities, or what the report calls non-profit organisations, and the absence of laws and capacity to monitor these or their misuse.
Indeed, the report simply underlines the enormity of the task ahead. Much work and patience is going to be needed. Politicising or sensationalising the issue is not going to help.
The writer is a journalist.
Published in Dawn, October 22nd, 2019