Pakistan has crossed the finish line but must wait another quarter of a year to obtain an international certificate and come off the “enhanced watch list” – the so-called Financial Action Task Force (FATF) gray list .

On Friday, the Paris-based global watchdog against financial crimes, in particular the fight against money laundering and the fight against the financing of terrorism (AML/CFT) said it would soon send a technical team to the Pakistan for an on-site visit to verify that the “implementation of Pakistani policy AML/CFT reforms have commenced and are being sustained and that the necessary political commitment remains in place to support the implementation and improvement in the future.” Verification would result in the formal “delisting” of Pakistan from the gray list.

The June 13-17 FATF Plenary held in Berlin unanimously endorsed, according to Deputy Foreign Minister Hina Rabbani Khar, that Pakistan had largely and substantially completed 34 points of two concurrent anti-money laundering action plans. (BC) and terrorist financing (FT). .

Delegates representing 206 FATF members and observers, including the International Monetary Fund, the United Nations (UN), the World Bank and the Egmont Group of Financial Intelligence Units, attended the plenary session. All stakeholders and authorities in Pakistan should be more careful during this period to ensure that there are no slippages.

Standing so close to the finish line is no mean feat in a culture where every store had fundraising points and private armed mafias could operate with impunity and obtain the highest level of protection.

In addition, it is easier to complete the action plan and get off the enhanced watch list, but it is more difficult to remain permanently integrated into the global regulatory system. It should be recalled that Pakistan was placed on the FATF gray list in June 2010 for strategic deficiencies in the AML/CFT regime and left it in February 2015.

But it fell again in the following years due to a series of terrorist attacks and risk assessments of activities such as financing terrorist groups, individuals and non-governmental organizations, in especially those on the UN lists. FATF and regional associates have also identified ML and TF risks through corruption, drug trafficking, fraud, tax evasion, smuggling, human trafficking and organized crime, etc.

Under the FATF process, a country must complete all or most of the components of its action plan to be removed from the watch list. Once the global watchdog has determined that a country has completed the components, it then schedules an on-site visit to confirm that the implementation of the necessary legal, regulatory and operational reforms is underway and that it has political commitment and institutional capacity to sustain implementation.

In the event of a positive outcome of the visit, the FATF will decide to remove the country from public identification at the next plenary. The country should, however, continue to work on improving its anti-money laundering and anti-terrorist financing regimes through the normal FATF monitoring process.

The journey has been long and tedious, but worth the journey, not because of international pressure, but to course-correct nationally where possible, given larger-than-acceptable black holes in the world. economy and society. It was nothing less than a betrayal from the start to raise harbingers of the emergence of an international environment unfavorable to our gray areas. Joining the FATF gray list in June 2018 was a wake-up call as the country was given 15 months until October 2019 to improve 27 action points.

Deadlines were repeatedly missed and enemies continued to push to blacklist Pakistan, which survived on its gradual progress despite slippages, coupled with support from friendly countries. As of March this year, Pakistan had completed 32 out of 34 action points, but the FATF insisted on swift action on the remaining loopholes in the financial system and to demonstrate prosecution of top leaders of designated terrorist groups. ‘UN.

By then, Islamabad had completed 26 of the 27 actions of its 2018 FATF Action Plan and six of the seven actions of the Asia-Pacific Group 2021 Action Plan, ahead of schedule. It boiled down to just three areas of “demonstrating” results through results-based pursuits. Authorities secured the conviction of a few high-level commanders over the following months.

Pushed by various global adversaries, Pakistan’s anti-money laundering and anti-terrorist financing system has proven to be insufficient. The shortcomings were so “strategic” in the areas of the financial sector, border control, legal standards, investigation and prosecution that even friends were neutralized when it came to international pressure on political considerations.

The gray listing of Pakistan in June 2018 by the Paris-based global watchdog on ML and FT came as a shock and awoke authorities living in silos.

According to the FATF, when it places a jurisdiction under heightened scrutiny, it signifies that the country is committed to resolving the strategic deficiencies identified within the agreed timeframe and is subject to heightened scrutiny. Failure to perform can lead to being described as a high-risk jurisdiction, subject to a call to action, commonly known as a blacklist, with deadly consequences like international financial exclusion.

Pakistan committed politically at the highest level to a 27-point action plan in June 2018. About 10 elements of the 27-point action plan related to strengthening financial sector security, regulatory protocols and border controls.

Nine points related to targeted financial sanctions against banned organizations and around eight related to strong investigation and prosecution mechanisms and systems. At least three dozen laws at the federal level had to be changed to meet the highest global standards as well as upstream and downstream reporting networks.

This needs to be done in a culture where every store – big and small – had fundraising and collection points, where at least half the economy was informal, where cases sat undecided for generations, and where mafias private armies could operate with impunity and obtain protection at the highest level. It was no small feat.

This involved numerous reorganizations of legal, security, financial, business, religious, regulatory and law enforcement structures that various entities had resisted for ages and were treated as virtual no-go areas under their respective domains.

Posted in Dawn, The Business and Finance Weekly, June 20, 2022