ISLAMABAD: As the Asia/Pacific Group (APG) on Money Laundering begins ‘mutual evaluation’ to gauge Pakistan’s compliance with global anti-money laundering and counter-terrorism financing standards, the country faces the risk of being grey-listed by the APG due to a very high ratio of nearly 70% non-compliance.
The Financial Action Task Force (FATF) has already grey-listed Pakistan with effect from June 2018 and any adverse findings by the APG – as a result of its March 26-28 inspections – could further complicate problems for the government.
The APG is the FATF-style regional body for the Asia-Pacific region. It is an inter-governmental organisation founded in 1997 in Bangkok. The mutual evaluation process by the APG is separate from the FATF but it is based on the implementation of 40 FATF recommendations.
The APG delegation arrived in Islamabad on Monday to conduct last on-site mutual evaluation of Pakistan that began in June 2018. It will be last face-to-face meeting by the mutual evaluation team, suggesting that Islamabad does not have the luxury to take a lenient approach. The APG has done Pakistan’s second mutual evaluation in the past ten years. The last mutual evaluation took place in 2009.
The mutual evaluation would be based on a third draft of technical compliance annexure that the APG shared with Pakistan this month. There is not much difference between the first and the latest draft technical annexure, a senior Finance Ministry official who has seen the report told The Express Tribune.
The APG Executive Secretary Gordon Hook would lead the delegation that is comprised of experts from the United Kingdom, the United States, Turkey, China, Indonesia, and Maldives.
The experts would hold meetings with the State Bank of Pakistan (SBP), the Securities and Exchange Commission of Pakistan (SECP), the Federal Investigation Agency (FIA), the National Accountability Bureau (NAB), provincial Counter Terrorism Departments (CTDs) and other law enforcement agencies.
“If we go by the third draft of technical annexure shared by the APG, there are high risks of being declared non-compliant,” said a senior government official who is directly working on the mutual evaluation. Out of 40 recommendations, the APG has provisionally assessed Pakistan non-compliant on nearly 28 recommendations, he added.
He said the country has to be fully compliant or largely compliant with at least 23 recommendations to avoid the grey list. Pakistan is already on the grey list of the FATF and even if it successfully implemented all the 27 actions determined by the FATF, its fate will hinge on the mutual evaluation report outcome.
It has also been conveyed to Finance Minister Asad Umar that the situation could worsen for Pakistan if it did not improve ranking on at least 8 to 10 recommendations, said another official who works for a counter-terrorism authority.
Umar chaired the National Executive Committee on Anti Money Laundering last week. He set up various sub-groups that would work in areas that could help improving compliance on both the FATF’s 40 recommendations and the 27-point action plan of the FATF.
A proper and coordinated response by all the domestic stakeholders was very critical to improve the compliance status of Pakistan. Officials said all the stakeholders were not on the same page, which not only created difficulties during Oct 2018 on-site inspection but might also create problems this time.
The Finance Ministry sources claimed that Pakistan was expecting to improve its rating on at least eight to ten recommendations that relate to the SECP, the Financial Monetary Unit (FMU), the SBP and the Foreign Office.
Out of 40 recommendations, Pakistan is fully compliant with hardly two, largely compliant with three and partially to largely compliant with another three. It is either partially compliant or non-compliant with the rest of the recommendations.
But Pakistani authorities believe that they have addressed the APG’s concerns in areas of customer due diligence, beneficial ownerships of legal persons, statistics, record keeping, money or value transfer services, new technologies, wire transfers, international cooperation, nuclear non-proliferation and targeted financial sanctions related to terrorism and terrorism financing.
After this last on-site visit, the APG would finalise its draft report that is expected to be shared with Islamabad by the end of April or early May for its comments. After Pakistan’s response, the Mutual Evaluation Report will be presented in the Annual General Meeting of the APG that is expected to take place in August. The APG meeting would either accept the report or suggest changes to it.
In case of the worst outcome, Pakistan may have to implement yet another Action Plan from October onwards. The FATF’s Action Plan implementation deadline is September this year. The February’s review on the implementation of the FATF Action Plan did not go well, which has increased pressure on Pakistan.
The next FATF review would take place in June in Washington and before that Pakistan will have to show compliance on 16 points that have been agreed for May in addition to three issues that were left out in the last review.