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Islamabad Continues to Struggle to Escape the Jurisdictions Under Increased Monitoring

By Sanchita Bhattacharya 

May 4, 2020 

Islamabad continues to struggle to escape the jurisdictions under Increased Monitoring, commonly known as the ‘grey-list’ of the global anti-money laundering regulator, the Financial Action Task Force (FATF). Pakistan has been on the ‘grey-list’ since June 2018 and there is always a looming danger of the country being put under the High-Risk Jurisdictions or ‘black-list’ at any time. 

In a characteristic act of evasion, a May 1, 2020, report indicated, Pakistan told a visiting team of a United Nations Security Council (UNSC) monitoring committee that it had been unable to act against numerous individuals listed in its sanctions list because the UN panel had given “insufficient information”. It told the UN team, which was on a five-day visit to Pakistan between March 9 and 13, that the List did not have the accurate date of birth, nationality, national ID number, passport number or a specific address of the men sanctioned for their terror links. Though the UNSC 1267 Sanctions List has 130 names from Pakistan, Islamabad acknowledges the presence of only 19 of them, including Lashkar-e-Taiba (LeT) ‘chief’ Hafiz Mohammad Saeed. 

Earlier, Castellum.AI, a US-based start-up that automates watchlist compliance, in a release on April 20, 2020, noted, 

At its height in October 2018, Pakistan's terrorist watchlist, the Proscribed Persons List, had about 7,600 names, according to a report from the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog. Castellum.AI regularly adds new data sources, and on March 9th Castellum.AI added the Pakistan Proscribed Persons List to its database. Between March 9th and March 27th, Castellum.AI data showed that Pakistan removed 1,069 names from the Proscribed Persons List, and that all those names then appeared on the country's Denotified List, a term used in Pakistan to signify an official removal. Since March 27th, about 800 more names were removed from the terrorist watchlist and placed on the Denotified List. Since its peak, about 3,800 names were removed from the Proscribed Persons List, without explanation or notification to the public [emphasis added]. 

However, Tahir Akbar Awan, an official with the Ministry of Interior, asserted that the list had become “bloated with multiple inaccuracies” because it contained names of individuals who had died and those who may have committed crimes but weren’t associated with a designated terrorist group. 

It is useful to recall here that FATF, in a release on February 21, 2020, had stated, “Pakistan should continue to work on implementing its action plan to address its strategic deficiencies” including targeting “designated persons and entities, and those acting on behalf or at the direction of the designated persons or entities” and “demonstrating that facilities and services owned or controlled by designated person are deprived of their resources and the usage of the resources.” 

In June 2018, when Pakistan was put in the ‘grey-list’ it made a high-level political commitment to work with FATF and the Asia Pacific Group (APG) to strengthen its Anti-Money Laundering/Combating the Financing of Terrorism regime. It had submitted a 27-point action plan. Subsequently, it started ‘working’ to implement the action plan. 

In a release on October 18, 2019, however, FATF noted that "all deadlines in the action plan have now expired" and that "to date, Pakistan has only largely addressed five of 27 action items, with varying levels of progress made on the rest of the action plan". It further noted, 

The FATF strongly urges Pakistan to swiftly complete its full action plan by February 2020. Otherwise, should significant and sustainable progress not be made across the full range of its action plan by the next Plenary, the FATF will take action, which could include the FATF calling on its members and urging all jurisdictions to advise their FIs [Foreign Investors] to give special attention to business relations and transactions with Pakistan. 

As expected, Pakistan failed to meet the deadline again, and FATF, in a release on February 21, 2020, reiterated that "all deadlines in the action plan have expired" and expressed concerns regarding "Pakistan's failure to complete its action plan in line with the agreed timelines." It set a new deadline of June 2020 and warned that "otherwise, should significant and sustainable progress especially in prosecuting and penalising TF [Terrorist Financing] not be made by the next Plenary, the FATF will take action." 

The COVID 19 global pandemic, however, has forced the FATF to delay it plenary scheduled to be held in June 2020. In a release on April 28, 2020, FATF stated, 

The gravity of the COVID-19 situation globally and the consequent COVID-19 related measures that countries have adopted, such as confinement and travel restrictions, are making it impossible for assessed jurisdictions and assessors alike to conduct on-site visits and in-person meetings. This situation has significantly impacted countries' ability to actively participate in mutual evaluation and related follow-up processes. The FATF Plenary acknowledges these severe challenges that countries face at this difficult time. The FATF Plenary has therefore agreed to temporarily postpone all remaining FATF mutual evaluations and follow-up deadlines… Likewise, the FATF has decided on a general pause in the review process for the list of high-risk jurisdictions subject to a call for action and jurisdictions subject to increased monitoring, by granting jurisdictions an additional four months for deadlines. 

Pakistan has thus secured a reprieve from an unexpected quarter, and it doesn’t want to let go this opportunity. The recent actions to prune the Terror Watch List and Sanction List are efforts in that that direction. It is expected that it will continue with its mischievous efforts and work on token ‘reforms’ at domestic level. 

Meanwhile, China is FATF chair since July 1, 2019. The 'all weather friend' has long provided Pakistan all possible help. Significantly, after the conclusion of the FATF plenary meeting on February, 2020, China, as expected, praised Pakistan's "enormous efforts" in combating terror financing. Chinese Foreign Ministry spokesman Geng Shuang declared, 

Pakistan has made enormous efforts in improving its counter-terror financing system, which has been recognised by the vast majority of the FATF members at its latest plenary meeting concluded on February 20 in Paris. 

With China’s help Pakistan was able to avoid possible ‘black-listing’ during the February 2020 plenary. 

There is, however, a looming worry for Pakistan. Chinese Presidentship of the FATF comes to an end on June 30, 2020. Though it is not known who is going to take over, it is definitely not going to be any country as unqualified in its support as the ‘all weather friend’. Pakistan is, consequently, making all efforts to at least meet the minima of notional compliance, in order to escape the grey list and evade the possibilities of blacklisting. 

Sanchita Bhattacharya is a Research Fellow, Institute for Conflict Management 

Original Headline: FATF Quicksand 

Source: South Asia Intelligence Review