Senate panel okays changes in laws on money laundering, forex

Updated 21 Feb 2020

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The panel members noted that the authorities were going beyond what had been expected by the FATF from Pakistan. — APP/File
The panel members noted that the authorities were going beyond what had been expected by the FATF from Pakistan. — APP/File

ISLAMABAD: After unanimously striking down certain clauses, the Senate Standing Committee on Finance on Tuesday approved amendments to two crucial bills on anti-money laundering and foreign exchange regulations to meet stipulations of the Financial Action Task Force (FATF).

This came almost two weeks ahead of Pakistan’s face-to-face meetings with the Joint Group of the FATF in Beijing later this month, to be followed by a FATF plenary next month that would decide if the country has done enough under the agreed action plan to be removed from the grey list or not.

The proposed laws cleared by the Senate panel — the Anti Money Laundering (Amendment) Bill (AMLA) 2019 and the Foreign Exchange Regulations (Amendment) (FERA) Bill 2019 — have been envisaged to address legal deficiencies pointed out by the FATF. The draft laws would now go to the Senate for approval and then sent back to the National Assembly for reconsideration.

However, the passage of the bill was not a smooth affair. While senior officials of the finance ministry grumbled over unanimous rejection by the committee of some important proposed clauses, like the limit on domestic movement of foreign currency and severity of punishment for money laundering, the panel members noted that the authorities were going beyond what had been expected by the FATF from Pakistan.

Move aimed at meeting FATF stipulations

That was not all. Some clauses were passed by the committee with a majority vote against the will of the opposition members, including chairman of the standing Committee Farooq H. Naek, who presided over the meeting.

Despite repeated pleadings by Finance Secretary Naveed Kamran Baloch and Additional Secretary Kamran Afzal, the committee unanimously rejected a proposed clause to restrict the inland movement of foreign currency to $10,000 or equivalent and to enhance punishment of money laundering as the authorities failed to put up a convincing defence.

Besides other weaknesses, ruling party senator Mohsin Aziz said 40pc of Pak-Afghan trade took place in cash and remaining 60pc through banking channels and hence the limit of $10,000 was too meagre that would cripple business interests.

However, the panel approved an amendment to allow officers to arrest anybody on suspicion of money laundering without court warrants, with a thin majority of 5-4.

The coalition party senators (PTI, MQM and Balochistan Awami Party) voted in favour of the amendment to declare money laundering a “cognizable offence”.

The senators disagreed with the impression from the government side that these amendments would strengthen its position before the FATF that Pakistan was committed to ending money laundering and terror financing and noted that these issues could easily be settled with better exchange of information among the financial institutions and improved governance.

The standing committee approved most of the amendments proposed by the government in the FERA 1947, except the proposal to restrict movement of foreign currency by individuals to only $10,000 within the country. The limits for authorised dealers, exchange companies and money changers would be prescribed by the State Bank of Pakistan.

Observing that such clauses could be misused by the authorities to “fix political opponents”, the senators unanimously rejected the proposal.

The standing committee also approved most of the proposed amendments to the AML Act of 2010 but did not approve an increase in the imprisonment limit after the finance ministry failed to establish that higher imprisonment term for money laundering was a requirement of the FATF.

The government had proposed 10-year sentence for money laundering, against the existing punishment of one to 10 years. The committee decided to keep the imprisonment term unchanged at 1-10 years and approved an increase in fine amount from Rs1 million to Rs5m.

Farooq Naek said out of 42 members of the Asia Pacific Group, only eight countries had declared money laundering a cognizable offence.

However, the clause was put to a vote and was approved with a majority vote of 5:4, hence money laundering would now become a cognizable offence that means the investigation officer would have the power to arrest anybody without a warrant from a judicial magistrate.

Published in Dawn, January 8th, 2020