Six months after removal from FTAF’s grey list, Pakistan erects a facade of compliance

More than six months have passed since the delisting of Pakistan by the Financial Action Task Force (FATF) from its grey list. However, a close look at the efforts made by Islamabad for implementing the FATF’s Action Plan reveals a huge difference between its claims and the reality. At the time of removing Pakistan from the list, the FATF had made it clear that the country would still be monitored for effective implementation of its Anti-Money Laundering (AML)/Countering Terror Financing (CFT) policies. Despite it, the country seems to remain in a state of policy reluctance when it comes to catering to the problematic domains.

At the February 2023 plenary held in Paris, the FATF president urged Pakistan to complete the committed Action Plan items related to AML/CFT systems. Pakistan, however keeps on citing various problems faced by its implementation agencies to avoid making any real efforts to tackle the problem. The country claims to have identified 12 United Nations Designated Persons (UNDP) of which 9 are said to be in Pakistan while 3 are located outside Pakistan. Projecting similar progress in Targeted Financial Sanctions (TFS) regime, Pakistan claims to have frozen 17 assets of 6 UNDPs and 189 assets of 118 associates of UNDP.

However, various state entities in the country acknowledge that the understanding of TFS regimes at the grass root level i.e., at the district level is inadequate with the officials being poorly trained and ill equipped to effectively implement the obligations. Pak observers also point out that hardly any punitive measure has been taken against negligent employees found not complying with TFS requirements.
The international community was shocked recently when a video went viral in which Hizbul Mujahideen chief and US-designated global terrorist Syed Salahuddin was seen leading the funeral prayers of one of India’s most-wanted terrorists, Bashir Ahmad Peer who was killed in Pakistan. Responding to the media reports about the incident, FATF president Raja Kumar of Singapore said: “I will not speculate on specific media reports. But. I think what is important is to emphasize that there continues to be monitoring of Pakistan’s progress by the Asia Pacific Group.”

Those who have closely watched Pakistan’s fixation with terrorism explain its inalienability from the domestic politics. Action on domestically proscribed persons or entities is influenced by political and military considerations. Moreover, listing and delisting under the Anti- Terrorism Act, (ATA) 1997 does not lead to subsequent oversight on such persons or entities, or freezing of their assets. Worse, the process of listing of proscribed entities is not effective in absence of proper feedback by provinces to the federal committees.

Therefore, implementation of TFS regimes, as well as proscription of individuals who indulged in terror financing and funding, remains inadequate. Similar is the state of identification of Non-Profit Organizations (NPO) which can be at risk of being misused for terror financing. Although Pakistan claims to have identified more than a thousand of them; there appear to be no meaningful efforts to identify NPOs which are actually and willfully indulging in terror financing. Unfortunately, the country has failed to find a single such organization despite open solicitation of funds by JeM and LeT related NPOs from the public. Going by the dismal state of compliance, the FATF Asia Pacific Group is expected to continue with the monitoring of Pakistan’s progress in curbing AML/CFT.

It is clear that despite delisting of Pakistan from the grey list, there is a lack of institutionalized approach to make AML/CFT policies and their implementation at provincial and district levels. However, saner voices keep on emerging from various quarters of the country against long term implications of the ill systems in place. ln some of the judgments, superior courts in Pakistan have raised questions on the integrity and transparency of domestic proscription of individuals by provincial and district level authorities, chiefly due to lack of reliance on verifiable facts and lack of efforts.