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Combating Terror Financing: Where Pakistan Stands On Global Yardsticks

Pakistan escaped the hangman’s noose last month for its failure to comply with the global terror watchdog, the Financial Action Task Force’s (FATF) Action Plan to combat terror financing. However, it remains in clear and present danger of slipping into the ‘dark grey’ or even the ‘black list’ going by the fine print of its compliance status accessed by SNI.

As the FATF data on Pak compliance to curb terror funding and money laundering reveals, just three months remain for Islamabad to implement six of the 12 Action Items (AIs) in the ‘Incomplete’ category of the Action Plan.

Furthermore, of the 21 Action Items which Pakistan failed to implement by the January or May 2019 deadlines, the FATF categorised them as only ‘Largely Addressed’ during its plenary session in Orlando, Florida in the United States last month.

The compliance status of Pakistan reveals a consistent pattern of missed deadlines for the 27 Action Items under the four Immediate Outcomes (IO) categories. As a result, Pakistan was able to bring under the ‘Largely Addressed’ category merely two of the 27 Action Items on which the FATF is seeking compliance.

During the Orlando plenary, SNI learns that FATF expressed concern over Pakistan’s tardy pace at implementing the Action Plan. Also while China along with Turkey, Malaysia and Saudi Arabia helped Pakistan escape the hangman’s noose in Orlando, FATF members including China have stressed that Islamabad must take earnest steps to implement the Action Plan.

Pakistan is expected to submit the final report on compliance with FATF requirements by August 15.

Desperate to avoid being placed on the blacklist, the Pak authorities have filed 23 cases of terror financing against the Lashkar-e-Taiba ( LeT) chief and 26/11 mastermind Hafiz Saeed and 12 of his aides.

India’s Ministry of External Affairs described the crackdown as “cosmetic steps” on Thursday. Spokesman Raveesh Kumar reiterated India’s demand seeking “demonstrable verifiable action” by Pakistan against terror outfits operating from its soil.

The FATF Action Plan is divided into four Immediate Outcomes (IOs) categories or areas where Pak action is being sought. The first among these is IO-3 that seeks supervision and enforcement of AML (Anti-Money Laundering)/CFT (Countering the Financing of Terrorism) controls by financial institutions. Under this category, Pakistan had six AIs of which it was able to address five partially while one remains incomplete.

Pakistan was unable to adhere to the deadlines for implementing the five AIs. Under these AIs, Pakistan is also required to show the impact that TF (Terror Financing) can have as well as provide the FATF with evidence on the action it’s taking against sanctioned financial institutions.

Under the second IO, IO-8, that requires checks on illicit movement of currency across borders, Pakistan has not been able to measure up to any of the four benchmarks required. Here again, the deadline for all but one AI is long gone.

To show adherence to items under IO-8, Pakistan has to not only provide evidence how it’s working to confiscate smuggled currency but also take steps to identify cash couriers and enforce controls on currency movement.

There are more demands on Pakistan under IO-9 but there too it has been able to ‘Largely Address’ only one of the requirements. Four others remain incomplete, two have been partially addressed and there was “no consensus” within the FATF on one item.

Among the issues that Pakistan needs to address under the IO-9 Action Items are: provide information on terror financing cases and whether the properties of outfits such as the Jamaat-ud-Dawa founded by Hafiz Saeed and the Falah-e-Insaniyat Foundation (FIF), have been taken over by the government.

The terror watchdog also wants Pakistan to provide information to show that while considering the risks of terror financing, it takes into account the transnational terror networks and how they are funded under IO-9.

Finally, under the fourth category IO-10, the FATF learnt during its plenary that only one of the nine Action Items was largely addressed, five were partially addressed and three remain incomplete. Clearly, Pakistan has a long way to go before it’s seen as sincerely cracking down on terror.

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