Col B S Nagial (Retd)
The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society. 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, with more than 200 countries and jurisdictions committed to implementing them. The FATF has developed theFATF Recommendations, or FATF Standards, which ensure a co-ordinated global response to prevent organised crime, corruption and terrorism. They help authorities go after criminals’ money dealing in illegal drugs, human trafficking and other crimes. The FATF also works to stop funding for weapons of mass destruction.The FATF reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks, such as regulating virtual assets, which have spread as cryptocurrencies and gained popularity. The FATF monitors countries to fully and effectively implement the FATF standards and hold Governments accountable for non-compliance.
The second Plenary of the FATF under the German Presidency of Dr Marcus Pleyer took place on the 22nd, 24th and 25thof February, 2021 in Paris. Delegates representing the 205 members of the global network and observer organisations, such as the IMF, the United Nations and the World Bank, worked through a full agenda to strengthen global safeguards to detect, prevent and disrupt the financial flows that fuel crime and terrorism. Due to the ongoing COVID-19 pandemic, the Plenary met virtually. As the pandemic continues to impact families, healthcare services, communities and economies worldwide, criminals continue to exploit the crisis for financial gain.During their discussions, delegates finalised work in several crucial areas. These include guidance to help countries take a practical, risk-based approach to supervision, investigate and prosecute terrorist financing, and work on illicit arms trafficking and terrorist financing, the latter two available to competent authorities. Delegates also agreed to release for public consultation draft guidance to assist countries, financial institutions, and DNFBPs in identifying, assessing and mitigating the risks of financing the proliferation of weapons of mass destruction and updated guidance on virtual assets and virtual asset service providers.
The FATF also advanced its work on ongoing key issues. These include digitalisation, making anti-money laundering and counter-terrorist financing (AML/CFT) action more effective and efficient. In particular, the FATF agreed to start new work on the digital transformation of AML/CFT for operational agencies. The FATF also continued discussions on the strategic review, which will shape the next round of mutual evaluations and make them timelier and risk-based. Delegates explored potential amendments to strengthen the FATF requirements on beneficial ownership further. The FATF’s joint assessment, as well as high-profile examples of abuse, demonstrate that criminals are still able to hide their illicit assets behind anonymous or complexlegal structures. Delegates discussed how to improve transparency and ensure that up-to-date beneficial ownership information is available to authorities. The FATF also discussed the preliminary findings in its ongoing work to overcome the challenges linked to the recovery of criminals’ assets, money laundering from environmental crimes, and the financing of ethnically and racially motivated terrorism.
* Improving risk-based supervision
* Mitigating the money laundering and terrorist financing risks of virtual assets
* Strengthening measures to prevent the financing of proliferation of weapons of mass destruction
* Improving terrorist financing investigations and prosecutions
* Tackling illicit arms trafficking and terrorist financing
FATF has said that Pakistan has failed to address its strategically important deficiencies and fully implement the 27-point action plan that the watchdog had drawn up to tackle the Islamic Republic. The report said that Islamabad had made some progress but still lacks initiatives to combat money laundering and terror funding. Last October the agency put Pakistan in ‘GREY LIST’ and had asked Pakistan to deliver on all the 27 points/observations listed out. But Pakistan failed to deliver on its commitments in a review which was conducted by the FATF. “To date, Pakistan has made progress across all action plan items and has now largely addressed 24 out of 27 items. As all action plan deadlines have expired, the FATF strongly urges Pakistan to complete its full action plan before June 2021 swiftly.” FATF said in a statement. It further said that Pakistan must continue its efforts to address strategically essential deficiencies, including demonstrating effective implementation of targeted financial sanction against designated terrorists, especially those acting on their behalf.
Pakistan’s continuation in ‘GREY LIST’ means that it will not get any respite in trying to access finances in the form of investments and aid from various international bodies, including International Monetary Fund(IMF) andWorld Bank. It is pertinent to mention that Pakistan has been on FATF’s ‘GREY LIST’ since June 2018. Pakistan was given a final warning in Feb 2020 to complete actions on all these 27 points. As things stand, Pakistan is finding it difficult to shield terror preparators and implement the FATF action plan at the same time. It is believed that Pakistan would suffer losses to FATF’s actions to the tune of USD 38 billion (as pointed out by a research paper published by a think-tank based in Islamabad). There will be a drop in consumption expenditures, loss of Foreign Direct Investment (FDI), exports, etc.
The use of proxy war as a tool of state policy is not a new phenomenon. It was employed broadly during the Cold War by the two leading competing powers. Afghanistan saw the impact of this proxy war. The erstwhile Union of the Soviet Socialist Republic (USSR), known as Russia, had a misadventure in Afganistan. USSR left Afganistan in late 1989 and ultimately disintegrated in 1991. USA raised the Taliban through Pakistan to fight against USSR in Afganistan. At the end of the cold war, the US emerged as the sole superpower globally, so America shunned terrorism as a state policy. Pakistan taking the benefit of the fluid situation in the region and to carry forward its policy to bleed India by thousand cuts, Pakistan jumped at the opportunity to exploit growing unrest in Jammu and Kashmir (J&K) in 1988.The 9/11terror attacks on the US brought the focus back on terrorism and its hub in the Afganistan-Pakistan region. It also highlighted the threat originating from Al-Qaeda and Pakistan-sponsored groups such as the Lashkar-e-Taiba (LeT) and Jaish-e-Mohammad (JeM). And 26/11 terror attack on Mumbai further strengthens the belief in the epicentre of terrorism. Although these groups gradually found themselves on the United Nations (UN) and the American list of terrorist groups, international punitive action remained constrained given the US reliance on Pakistan in its Global War on Terror (GWOT). Pakistan dexterously exploited its role in Afghanistan by continuing to employ state terrorism in J&K through its perpetrators. This placed the challenge of countering the transnational threat of terrorism in J&K squarely on the Indian state, despite its international character. Indeed, if Pakistan stops the terror funding, then there can be the hope of peace in the Indian Subcontinent and the world.