Context: As per reports,the Financial Action Task Force has decided to grant Pakistan and other countries on its watch list a three-month extension on certain fulfilling commitments.
- Pakistan was placed on the grey list or “increased monitoring” list in June 2018, and given time until October 2019, in order to complete a 27-point action plan on countering terror finance and anti-money laundering.
- It would be put on the black list of “high-risk jurisdictions” facing severe financial sanctions.
- Orders for Pakistan include:
- Improving mechanisms to curb terror financing,
- Amending laws to curb ‘Hawala’ transactions and placing sanctions against cash couriers who facilitate terror groups,
- Completing the prosecution of groups banned by the UNSC, and converting madrassas run by them into formal schools.
- Despite this being Pakistan’s third stint on the FATF watch list (prior occasions were in 2008 and 2012-2015), there is little evidence that Pakistan has made changes as suggested by FATF.
- Pakistan remains a “safe haven” for most UN proscribed groups.
Key highlights of the report:
- Complex fraud and tax evasion: The “Money Laundering and the Illegal Wildlife Trade” report said criminals are frequently misusing the legitimate wildlife trade, as well as other import-export type businesses, as a front to move and hide illegal proceeds from wildlife crimes.
- Funds are laundered through cash deposits, under the guise of loans or payments, e-banking platforms, licensed money value transfer systems, and third-party wire transfers via banks
- The report adds that Pakistan's steps to prosecute certain leaders of JeM (Jaish-e-Mohammed) and LeT (Lashkar-e-Taiba) are inadequate.
- The report says a financial probe is key to dismantling the syndicates involved, which can in turn significantly impact the associated criminal activities.
- Findings of the study expressed concern over the lack of focus on the financial aspects of the crime.
- There is a lack of required knowledge, legislative basis and resources to assess and combat the threat posed by the funds generated through the illegal trade. Illegal trade is estimated to generate revenues of up to $23 billion a year.
- Misuse of front companies: Front companies, often linked to import-export industries, and shell firms are used for the movement of goods and trans-border money transfers.
- The Financial Action Task Force (on Money Laundering) (FATF) is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
- The FATF Secretariat is located at the OECD headquarters in Paris.
- As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
- The FATF reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks, such as the regulation of virtual assets, which have spread as cryptocurrencies gain popularity.
- The FATF monitors countries to ensure they implement the FATF Standards fully and effectively, and holds countries to account that do not comply.
- FATF has maintained the FATF blacklist (formally called the "Call for action") and the FATF greylist (formally called the "Other monitored jurisdictions").