Pakistan has failed to complete its action plan on terror financing, the Financial Action Task Force (FATF) said on June 21, warning Islamabad to meet its commitment by October or face action, which could possibly lead to the country getting blacklisted.

The Paris-based global body is working to curb terror financing and money laundering and has asked Pakistan to reassess the operation of banned terrorist outfits in the country.

In June 2018, the FATF placed Pakistan on the grey list of countries whose domestic laws are considered weak to tackle the challenges of money laundering and terrorism financing.

In a statement issued at the conclusion of its plenary meeting in Orlando, Florida, the FATF expressed concern “that not only did Pakistan fail to complete its action plan items with January deadlines, it also failed to complete its action plan items due May”.

The FATF “strongly” urges Pakistan to swiftly complete its action plan by October when the last set of action plan items are set to expire.

“Otherwise, the FATF will decide the next step at that time for insufficient progress,” it said, leaving a strong warning to Pakistan.

The FATF said Pakistan had taken steps towards improving its AML/CFT (anti-money laundering/combating the financial terrorism) regime, including the recent development of its terror funding risk assessment addendum.

However, it does not demonstrate a proper understanding of Pakistan’s transnational terror funding risk.

How did Pakistan react?

Reacting to the FATF’s warning, Pakistan said it was committed to taking measures needed to implement the action plan agreed with the FATF to come out of the grey list.

“The Government of Pakistan reiterates its commitment to take all necessary measures to ensure completion of the action plan in a timely manner,” the finance ministry said.

What the FATF wants

* Pakistan should continue to work on implementing its action plan to address its strategic deficiencies, including by adequately demonstrating its proper understanding of the terror funding risks posed by terrorist groups and conducting supervision on a risk-sensitive basis.

* It should demonstrate that remedial actions and sanctions are applied in cases of AML/CFT violations, and that these actions have an effect on AML/CFT compliance by financial institutions.

* It should demonstrate that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services.

* It should show that authorities are identifying cash couriers and enforcing controls on illicit movement of currency and understanding the risk of cash couriers being used for terror funding.

* It should improve inter-agency coordination, including between provincial and federal authorities on combating terror funding risks, and demonstrate that law enforcement agencies are identifying and investigating the widest range of terror funding activities.

* It should demonstrate that terror funding investigations and prosecutions target designated persons and entities, and persons and entities acting on behalf or at the direction of the designated persons or entities.

* It should demonstrate terror funding prosecutions result in effective, proportionate and dissuasive sanctions and enhance the capacity and support for prosecutors and the judiciary.

* It needs to effectively implement targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets and prohibiting access to funds and financial services.

* It should demonstrate enforcement against TFS violations, including administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases.

* It should demonstrate that facilities and services owned or controlled by designated persons are deprived of their resources and the usage of the resources.

The FATF currently has 36 members with voting powers and two regional organisations, representing most of the major financial centres in all parts of the globe.

China is set to secure FATF presidency next year while Saudi Arabia - representing the Gulf Cooperation Council - is to become a full FATF member. Turkey was the only member that stood by Pakistan despite a strong campaign launched by the US, UK and India.

How did India react?

India said it expects Pakistan to take all necessary steps to effectively implement the FATF action plan fully by September and take credible, verifiable and irreversible measures to address global concerns related to terrorism and terrorist financing emanating from its soil.

In response to a media query, Ministry of External Affairs spokesman Raveesh Kumar said the FATF has decided to continue to keep Pakistan on its compliance document (grey list) for the International Cooperation Review Group monitoring for its failure to complete the action plan items due in January and May.

“We expect Pakistan to take all necessary steps to effectively implement the FATF action plan fully within the remaining time frame in accordance with its political commitment to the FATF and take credible, verifiable, irreversible and sustainable measures to address global concerns related to terrorism and terrorist financing emanating from any territory under its control,” he said.