A delegation from the global financial watchdog Financial Action Task Force (FATF) has held meetings with Pakistani authorities to review the country's measures against money laundering and terror financing.
A six-member team from the Asia Pacific Group (APG) was in Islamabad this past week to monitor Pakistan’s progress after the country was placed on FATF’s gray list in June, following months of negotiation by Pakistan to avoid being put in the list.
At the time, Pakistan submitted a comprehensive 26-point strategy to fight terror financing and ensured the international community that it will take adequate steps to bar militant groups from laundering money. But Pakistan’s efforts failed to convince the global watchdog, and Islamabad was placed on the watchdog’s list.
This week, the FATF representatives met with government officials in Pakistan and evaluated the country’s progress in its fight against terror financing. The APG delegation will submit its findings to the Paris-based FATF.
No formal announcement was made either by the APG or the Pakistani government regarding the meetings.
“The recent meetings between FATF and Pakistani officials should be taken in a positive way. Pakistan is a big country and has some international responsibilities to play its role towards terror financing and money laundering,” Dr. Salman Shah, an economist and former finance minister of Pakistan, told VOA.
“There are some loopholes in the system, but Pakistan is adamant to overcome these shortfalls and to combat terrorism in any form. I’m sure Pakistan will take FATF’s suggestions seriously and will manage to evade the gray list soon,” Shah added.
If Pakistan fails to take adequate measures in accordance with the guidance of FATF, the country could be placed on the group's black list, further undermining the country’s already fragile economy as international investors would be discouraged from investing in the country.
Findings
According to local media reports, the FATF delegation found that Pakistan would need to implement stricter laws, strengthen law enforcement agencies, and make terror financing and money laundering extraditable offenses.
While the APG applauded some measures taken by the Pakistani security and financial authorities, it noted that the government needs to adopt an "enhanced legal framework" to overcome inadequacies regarding nonprofit and charitable organizations, and to form counter-terror finance measures to point out suspicious transaction reports (STRs).
Some Pakistani analysts, including Ayub Tareen, think Pakistan has, in recent years, implemented strict measures in its banking sector that bars individuals and groups from laundering money and getting involved in terror financing -- activities they had previously been able to do without being noticed and scrutinized.
“Pakistan has enacted strict banking laws that make it virtually impossible to move money through banking channels. It is unfortunate that the Asia Pacific group did not take a closer look at Pakistan’s financial system,” Tareen, an economist from Pakistan, said.
Others believe the main issue that needs to be tackled is the informal financial channels that militants rely on to funnel and launder money.
“While Pakistan has made substantial banking reforms, the problems lie outside the banking system,” Khalid Farooqi, a security analyst based in Brussels, told VOA.
“It is mainly informally channeled money that is being moved inside and outside the country that leads to Pakistan’s reputation for terror financing,” Farooqi added.
Terror financing remains a threat within Pakistan, where terror groups allegedly continue to gather hefty amounts of money under the guise of religion and welfare for the poor.
Foreign funding, drug trafficking, extortion from businesses and kidnapping for ransom are other means of income for militants in Pakistan. Hawala system, an alternative or parallel banking system, is also frequently used by terrorists to launder money.
New regulations
In June, Securities and Exchange Commission of Pakistan (SECP), the national financial authority, introduced new regulations to choke terror financing and money laundering to comply with the FATF’s guidelines.
The framework, named “Anti-Money Laundering and Countering Financing of Terrorism Regulations, 2018,” is designed to help identify criminals and militant elements that hide behind the “complex ownership structure of companies or other similar forms."
Prior to that, SECP issued in January a notification that banned individuals and groups placed on terror watch lists by Pakistan and the U.N. Security Council from collecting funds.
The directive also banned those groups from arranging any political, social, welfare or religious events in the country.
The international community has repeatedly voiced concerns over Pakistan's noncompliance to established international guidelines to choke terror financing.
Pakistan denies the allegations and maintains that it has curbed the financial assets of militant elements without any discrimination.
Gray List
Earlier this year, the United States, France, Britain and Germany submitted a motion to the FATF alleging Pakistan had failed to adhere to the watchdog's guidelines on terror financing and anti-money laundering regulations.
In February, during a meeting of FATF-member countries in Paris, it was decided that Pakistan be put on the FATF's gray list. The purpose was to put pressure on Pakistan to beef up its efforts against terror financing.
Lisa Curtis, a U.S. National Security Council official, visited Islamabad after the FATF decision and raised U.S. concerns over the issue.
"There has been a long-standing concern about the ongoing deficiencies in Pakistan's implementation of its anti-money laundering/counterterrorism finance regime,” Curtis said at the time.
Pakistan has been placed on the FATF’s gray list previously. The country was on the list from 2012-2015.
Nafisa Hoodbhoy of VOA’s Urdu service contributed to this report from Washington.
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