Wednesday, March 29, 2023

Pakistan FATF Panel Ranking Improving

The Asia Pacific Group (APG) on Money Laundering improved Pakistan’s ranking on four more of the Financial Action Task Force (FATF) technical recommendations against money laundering and terrorist financing (AML / CFT) but maintained it under ‘Improved Follow-Up’ to meet outstanding requirements.

“Pakistan has 35 recommendations that have been assessed as completely or substantially compliant (C/LC). Pakistan will continue to be monitored closely and will continue to report to APG on progress toward strengthening its implementation of AML/CFT measures,” said APG, a regional offshoot of the Paris-based FATF.

According to the third Follow-Up Report (FUR) on Mutual Evaluation of Pakistan issued by APG, Pakistan is now fully ‘compliant with eight recommendations and ‘largely compliant with 27 others. The re-rating to compliance status was one notch higher, while three others were rated as substantially compliant.

Out of a total of 40 recommendations, the country is ‘partially compliant with three, compared to seven in June this year, and is not compliant with two (unchanged since June). Overall, Pakistan currently fully or substantially complies with 35 of the 40 FATF recommendations.

The APG stated, “Pakistan has made considerable progress in addressing the technical compliance shortcomings noted in its Mutual Evaluation Report (MER) and has been re-rated on R.10, R.18, R.26, and R.34.”

As a result, Pakistan demonstrated good progress on a suggestion and was promoted to compliant. This reclassification occurred as a result of Pakistan’s implementation of comprehensive AML/CFT obligations to the Central Directorate National Savings (CDNS), and entities providing financial services previously provided by Pakistan Post are subject to the same AML/CFT obligations as others regulated by the SBP and SECP. Microfinance Banks (MFBs) and Foreign Exchange Companies (ECs) are now subject to the same AML/CFT requirements as other entities regulated by the SBP.

Similarly, on three instances, Pakistan was upgraded from ‘partially compliant to ‘largely compliant,’ referring to recommendations 18, 26, and 34. Recommendation 18 concerns the screening of personnel and workers in financial institutions, CDNS, MFBs, and ECs, among other things.

The evaluation’s reporting deadline was February 1, 2021, therefore Islamabad may have achieved further progress after then that will be assessed at a later date. Pakistan filed its third progress report in February 2021, asking for re-ratings for R.10, 18, 26, and 34. The APG applauded Pakistan’s efforts to enhance technical compliance with all four suggestions.

Separately, the Ministry of Finance and the chairman of the FATF task force, Hammad Azhar, welcomed the re-rating, stating that Pakistan was well situated in technical compliance in comparison to many other nations. For example, when compared to G20 nations, Pakistan ranks fourth, after Italy (38), the Kingdom of Saudi Arabia (38), and the United Kingdom (31), (38).

“Pakistan is currently in the top tier of nations that have obtained a grade of C/LC for almost 35 of the 40 FATF Recommendations,” the finance ministry stated, adding that the country was also rated as mostly compliant or compliant in all six main FATF recommendations. Money laundering, terror funding, targeted financial penalties connected to terrorism and terrorist financing, customer due diligence, record-keeping, and reporting of suspicious transactions are all criminal offenses.

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