Enforcing FATF action plan
Presided by the Caretaker Prime Minister Justice (Retd) Nasirul Mulk on Friday, National Security Committee (NSC) meeting reaffirmed its commitment to implement the action Plan that was agreed with the Financial Action Task Force (FATF), the international illicit financing watchdog for checking terror financing and money laundering. The plan was discussed and the participants reiterated to fulfill the obligations regarding combating money laundering and terror financing, said a statement issued by the Prime Minister’s office.
A Pakistani delegation led by finance minister Dr. Shamshad Akhtar visited Paris for negotiating the action plan with the officials of the FATF and International Cooperation Review Group. But in the meanwhile National Counter Terrorism Authority (NACTA) issued a notification after receiving recommendations from Punjab Home Department for unfreezing the bank accounts of a notorious fourth scheduler who runs a sectarian organization to which Lej is believed to be affiliated. He was otherwise preparing to join mainstream political process. In the estimation of international community the appearance of the present actions will certainly outweigh any future probabilities that fourth schedulers are electable.
It should be recalled that National Security Committee in its last meeting in June had extended the commitment to implement the action plan. The FATF, while notifying Pakistan on its grey list had welcomed the apparent political commitment of Pakistan to their actions. The watchdog requires high level of political commitment from the country concerned to enforce the needed legal, regulatory and operational reforms. The NSC members discussed the way forward for addressing international concerns about the weaknesses in the national counterterrorism financing and anti-money laundering regimes. But will the next elected government take concrete measures to satisfy the international community about its firm resolve for curbing terror financing and money laundering, which is devouring the state from within?.
The economic implications of grey listing should not be overlooked. Putting Pakistan back on watch list once again did not show its impact immediately but leading bankers believe that cost of doing business would get higher and situation for the banks would become more difficult than it was during 2012-15. The country has already slipped down to 147th position on the World Bank Ease of Doing Business Index for 2017, vitiating the economic environment for credit worthiness, foreign and domestic investment.
Pakistan was placed on FATF grey list on June 27, indicating that the country had failed to put in place measures to prevent money laundering and other illegal transactions that may be used for financing terrorism. In this scenario, large banks like JP Morgan Chase, Citi Bank, Standard Charter Bank and others will suspend credit lines which mean they would not accept letter of credit (LCs).
Pakistani banks find it very difficult to operate under the current laws and regulations in countries like US. Last year Habib Bank had to pay a penalty of $ 225 million to the Department of Financial Services (DFS) New York State for violating multiple state regulations and also had to unwind its operation there. The Federal Investigation Agency on Friday detained Central depositing Company (CDS) Chairman and Summit Bank Vice Chairman Hussain Lawai, who is widely believed to be close to former President and PPP Co-Chairperson Asif Ali Zarfdari, and Assistant Vice President of Sindh Bank Mr. Mukhtiar along with two other bankers for interrogation in money laundering case. Will Mr. Lawai connection with a head of a mainstream political party not cast a big question mark on political commitment in the future political set up for the implementation of FATF action plan keeping in view the political clout that PPP may have in future legislations and decision making of national and international bearing? It remains to be seen how the next elected government show its spine to honour commitments regarding FATF action plan.