ISLAMABAD: The Asia Pacific Group (APG) on Money Laundering has improved Pakistan’s rating on 21 of the 40 technical recommendations of the Financial Action Task Force (FATF) against money laundering and terror financing, but retained it on ‘Enhanced Follow-up’ for sufficient outstanding requirements.
The second Follow-Up Report (FUR) on Mutual Evaluation of Pakistan released by the APG — a regional affiliate of the Paris-based FATF — also downgraded the country on one criteria. The report said Pakistan was re-rated to ‘compliant’ status on five counts and on 15 others to ‘largely compliant’ and on yet another count to ‘partially compliant’.
Overall, Pakistan is now fully ‘compliant’ with seven recommendations and ‘largely compliant’ with 24 others. The country is ‘partially compliant’ with seven recommendations and ‘non-compliant’ with two out of total 40 recommendations. All in all, Pakistan is now compliant or largely compliant with 31 out of 40 FATF recommendations.
The reporting date for this evaluation was October 1, 2020, which means Islamabad may have made further progress since then that would be evaluated at a later stage.
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“Pakistan will move from enhanced (expedited) to enhanced follow-up, and will continue to report back to the APG on progress to strengthen its implementation of anti-money laundering and combating financing terror (AML/CFT) measures,” the APG said.
Pakistan submitted its third progress report in February 2021 and is yet to be evaluated.
Islamabad now compliant or largely compliant with 31 out of 40 recommendations
“Overall, Pakistan has made notable progress in addressing the technical compliance deficiencies identified in its Mutual Evaluation Report (MER) and has been re-rated on 22 recommendations,” the APG added.
It said recommendations 14, 19, 20, 21 and 27 had been re-rated to compliant. These pertain to money or value transfer services, higher risk countries, reporting of suspicious transactions, tipping-off and confidentiality and powers of supervisors.
The APG said Pakistan was re-rated to largely compliant with 15 recommendations — 1, 6, 7, 8, 12, 17, 22, 23, 24, 25, 30, 31, 32, 35 and 40. These include assessing risk and adopting risk-based approach, targeted financial sanctions relating to terror and terror financing, targeted financial sanctions related to proliferation, non-profit organisation, politically exposed persons and reliance on third parties.
Also, re-rating was done on designated non-financial business & professions (DNFBPs) in terms of due diligence and other measures, transparency in beneficial ownership of legal persons and related legal arrangements, responsibilities of law enforcement and investigation authorities, cash couriers, sanctions and other forms of international cooperation.
Another re-rating to partially compliant status was done on recommendation 28 that pertained to regulation and supervision of DNFBPs. The two recommendations on which Pakistan was downgraded to ‘non-complaint’ were 37 and 38 due to insufficient progress and pertained to mutual legal assistance (MLA) with other countries and freezing and confiscation of assets and accounts.
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In the first FUR of February last year, Pakistan’s progress was largely found unchanged — non-compliant on four counts, partially compliant on 25 counts and largely compliant on nine recommendations. Since then, the government worked aggressively and improved its effectiveness on AML/CFT system.
In February, Pakistan submitted its third progress report requesting re-rating for recommendations 10, 18, 26 and 34. A review team has been formed to assess compliance with these recommendations. Pakistan has not reported on its progress rectifying deficiencies identified in R-15 or 33, the APG said.
The finance ministry and Minister for Energy Hammad Azhar, who is also head of the task force on FATF, separately welcomed the re-rating, saying the results proved the sincerity along with resolve of the government in complying with the FATF requirements.
“These results are also a manifestation of the irreversibility and sustainability of the complete process in bringing Pakistan at par with global AML/CFT standards,” the finance ministry said, adding that “an upgrade of 21 recommendations within this short period of time remains unprecedented in FATF history”.
FATF’s Mutual Evaluation Report (MER) of jurisdictions is assessed in two domains — technical compliance or legal instruments (40 FATF recommendations) and demonstration of effectiveness (11 immediate outcomes). Pakistan’s MER was adopted in October 2019 in which the country was rated compliant and largely complaint in 10 out of 40 recommendations.
After adoption of MER, Pakistan was placed under post-observation period by the FATF, which expired in February this year. During the said period, Pakistan carried out major legal reforms with the enactment of 14 federal laws and three provincial laws along with relevant rules and regulations.
The weaknesses in MLA with other countries resulted in non-compliance on two recommendations — 37 and 38. This pertained to the restrictive new condition imposed on MLA through the new requirement to inform the subject of the request.
“Having considered the nature and scope of the remaining gaps, and Pakistan’s risk and context, these gaps have been given major weight in determining the final rating on non-compliance,” the APG said.
Published in Dawn, June 5th, 2021