FATF and Pak

In its latest review, the Financial Action Task Force (FATF) conceded that Pakistan has addressed 21 of the 27 items. Though, Indian media would have us believe that only 13 of the listed shortcomings have been rectified.

There was no voting, but Indian media reported that even Saudi Arabia voted against Pakistan. It is true, however, that Islamabad has been given four more months to complete swiftly its full action plan by February 2021 as an all actions plan deadlines have expired.

FATF’s objectives

The financial Action Task Force has ostensibly noble objectives. It provides a `legal’, regulatory, framework for muzzling the hydra headed monster of money-laundering. It aims at identifying loopholes in prevailing financial system and plugging them.

Deviation from objectives

Aside from its declared objectives, the FATF has become a diplomatic tool to coerce or pamper countries, accused of financing terrorism or facilitating money-laundering. The FATF is more interested in disciplining a state like Pakistan, not toeing US policies, than in checking money-laundering.

Read more: FATF and the politics behind ‘terrorism’

The consequences of being in the grey list may entail economic sanctions and difficulties in obtaining loans from international donors like International Monetary Fund, World Bank and Asian Development Bank. The trade-and-aid difficulties may retard economic progress of a country.

Favoritism towards India

The US Senate Banking Committee reviewed money laundering and terror financing in the Middle East. During the review they looked at the situation in India and Pakistan also. India has a much larger Gross Domestic Product (US$2875.14 (2019), than Pakistan’s paltry US$ 264 billion (2020). Similarly, India has a much larger and wealthier diaspora than Pakistan particularly in the Middle East and the USA.

Obviously, the international watchdogs look the other way when it comes to scrutinizing India.

The hawala (hand to hand transactions) and other money transfer practices among Indians and Pakistanis are similar. Yet, the FATF always keeps Pakistan in focus and looks the other way when it comes to India.

The US Assistant Secretary of State for Economic and Business Affairs, Anthony Wayne told the Senate Banking Committee that in India, two accounts belonging to terrorist individuals/entities had been identified. However, the Indian government has not frozen any assets to date even though it is aware of the UN 1267. Wayne noted that India’s Prevention of Money Laundering Act criminalizes money laundering and requires banks and other financial institutions and intermediaries to report individual transactions valued at over $23,000 to the financial-investigation unit. The US official added that India has also indicated it wants to join the FATF. However, at a recent FATF plenary meeting in Paris, concerns were raised regarding its ability to provide.

Read more: FATF: Pakistan’s chances of exiting the gray list?

A recent document-based report by the International Consortium of Investigative Journalists has blown the lid off the suspicious financial transactions by Indian banks, public and private sector companies.

The ICIJ report based on Financial Crimes Enforcement Network (Finsen) files represent less than 0.02 percent of the more than 12 million suspicious activity reports that financial institutions filed with Finsen between 2011 and 2017.

Not only banks but public and private sector companies were also the culprits. They include Hindustan Aeronautics Limited, Bhutan Steel Limited, Bharti Airtel and Essar.

The FATF was scheduled to review India’s money laundering and terrorist financing regime over a 10-year cycle in Sept-Oct 2020. However, this has been postponed to Jan-Feb 2022, ‘ostensibly’ in view of the Covid-19 pandemic in India.

In a bird’s eye view of the findings, Indian banks figure in over 2,000 transactions, linked to Indian entities, valued at over one billion dollars between 2011 and 2017. These banks include the State Bank of India, Punjab National Bank, Canara Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank and IndusInd Bank.

Read more: Pakistan to very likely exit FATF grey list next year

Pakistan is detested while, India is a protégé at the FATF only because of stark geo-political interests. Otherwise the money laundering situation in India is no less gruesome than in Pakistan. India has even been a conduit of ammunition to the Islamic State, study conducted by Conflict Armament Research had confirmed that seven Indian companies were involved in the supply chain of over 700 components, including fuses or detonating cords used by the so-called Islamic State to construct improvised explosive devices.

Anti money-laundering laws are to be brought in conformity with international standards prescribed by the Financial Action Task Force (FATF)

The FATF was scheduled to review India’s money laundering and terrorist financing regime over a 10-year cycle in Sept-Oct 2020. However, this has been postponed to Jan-Feb 2022, ‘ostensibly’ in view of the Covid-19 pandemic in India.

Obviously, the international watchdogs look the other way when it comes to scrutinizing India.

Read more: Pakistan will be excluded from FATF grey-list: China

Politically motivated hostility towards Pakistan

Pakistan’s current predicament negates sentiments expressed in the US Senate’s Banking Committee about Pakistan. Turning to Pakistan, let me just note that we, of course, all welcome the concrete actions that it has taken to implement its U.N. Security Council resolutions, the freezing of over $10 million of Al Qaeda assets, and the terrorists they have apprehended, including Abu Faraj al-Libbi, Al Qaeda’s operational leader. We are also encouraged that Pakistan is showing increased concern about the infiltration of terrorist groups into charitable organizations.

Pakistan’s progress

Pakistan has successfully convicted four designated persons and two other senior leaders, and the terror financing cases have been instituted against 11 designated persons (61 cases) and eight other leaders (37 cases).

Anti-Terrorism (Third Amendment) Act, 2020

It enables law-enforcement authorities to carry out undercover operations, intercept communications and access computer systems. Detention period of 60 days may be extended to another 60 days. The opposition wants the interception clause to be omitted to avoid a mala fide invasion of privacy.

In the Anti-Money Laundering (Amendment) Act, 2020

Anti money-laundering laws are to be brought in conformity with international standards prescribed by the Financial Action Task Force (FATF). Proposed punishment for money laundering is up to ten years, fine extendable to twenty-five million rupees, plus forfeiture of property, when done by a normal person (directors, partners/employees). In case of a legal person, the fine may extend up to one hundred million rupees.

Read more: FATF-related legislation: PM Imran accuses opposition of being on the same page with India

The National Executive Committee composed of minister of finance or adviser to the PM on finance, minister of foreign affairs and others mentioned in Schedule-II, has been constituted. The committee is supposed to make recommendations to the federal government relating to effective implementation of the Act, determination of offences existing in Pakistan, application of countermeasures to combat money laundering etc. It may constitute one or more sub-committees and may delegate or assign its functions to the general committee or a sub-committee.

Political considerations, not primary objectives, override voting behavior at the FATF.

Financial Monitoring Unit is an independent decision-making authority, having a financial expert as its director general. Numerous business restrictions have been imposed, including restriction on conducting business with anonymous customers. Offices working under the act have been provided protection from civil or criminal liabilities, which in effect will result in infringement of rights by overly powerful officers. Fundamental rights are being sacrificed at the altar of ‘accountability’.

The Islamabad Capital Territory Waqf Property Act, 2020

This act pertains to management, administration and supervision of trusts registered within the local limits of the Islamabad. Its purpose is to cater to effective administration and financial monitoring and evaluation of waqf property and how it shall be created and who may create it. The chief commissioner is empowered to appoint the administrator and deputy administrators for waqf properties. These properties shall be registered with the chief administrator and the district collector shall furnish a consolidated annual report of all waqf properties recorded as waqf during the year, in respect of revenue limits of ICT to the chief administrator.

Read more: Pakistan’s expected exit from FATF list would put India on the spot

During the lifetime of a waqf, the chief administrator cannot take over and assume the administrative control, management and maintenance of such waqf property. Through this act, the chief commissioner is granted the power to sell the waqf property if needed and the procedure to sell has been discussed in the act. He shall keep accounts of income and expenditure.

Companies (Amendment) Act, 2020

A prohibition on issuance of bearer shares or bearer share warrants has been imposed. Duty has been imposed on every company to maintain a register of its ultimate beneficial owners and record their accurate and updated particulars, while penalty for noncompliance with this is a fine up to one million rupees, or up to ten million rupees, for normal and legal persons respectively.

Limited Liability Partnership (Amendment) Act, 2020

Limited liability partnership has to maintain and timely update particulars of the ultimate beneficial owner of any person who is a partner. If it fails to comply with these requirements, a fine up to one million rupees if a natural person, and up to ten million rupees if limited liability partnership. Excessive monitoring procedures might discourage businesses, and thereby cause loss to the economy.

Read more: FATF satisfied over Pakistan’s measures countering terror financing

Charities

Pakistani and Hamas charities are under a scanner. The Senate Banking Committee appreciated that Pakistan has created a Centre for Philanthropy. Yet, no tangible action is visible regarding charities based in Arab world including Saudi Arabia, UAE and other countries. The Saudi charities allegedly dole out money to anti-Iran entities.

Conclusion

Political considerations, not primary objectives, override voting behavior at the FATF. Pakistan has not been able to speed up further enactments for a host of difficulties including opposition’s reservations. Pakistan needs 15 out of the FATF’s 39 members to exit the “grey list”.

Read more: Pakistan’s concrete progress in implementation of FATF Action Plan

Mr. Amjed Jaaved has been writing freelance for over five decades. He has served the federal and provincial governments of Pakistan for 39 years. His contributions stand published in the leading dailies and magazines at home and abroad (Nepal. Bangladesh, et. al.). He is the author of eight e-books including The Myth of Accession. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.

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