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The FATF Monster Pakistan is Facing Now: ‘Money Laundering’

The 229-page October 2019 FATF recommendations is a gigantic graphic indictment of the failed Pakistan system, its broken laws, lack of commitment and coordination and was largely divided into two parts – Money Laundering and Terrorism Financing.

Terrorism financing is being dealt with more effectively by the security establishment. But the money laundering part of MER is a work in progress in the civilian domain and has far reaching implications and consequences for the state, the political government, the political system and the nation.

In five years (2013-2018) the total number of money laundering cases investigated by various agencies was 2,420, of which 354 were prosecuted and only ONE case of NAB resulted in a conviction: the report mentions the conviction of Nawaz Sharif as a case example. “Corruption is endemic across Pakistan’s economy,” the report observes.

Out of all the 40 recommendations, only one was judged as “Compliant” and ironically it was about “Financial Institutions Secrecy Laws”. So Pakistan was judged good at keeping these matters under wraps.

The Assets Recovery Unit (ARU) headed by Barrister Shahzad Akbar was created as a FATF condition.

A very senior (just-retired) top bureaucrat of Pakistan, when asked to see the report and comment on it said: “I was about to get a heart attack. It’s such a hair-raising script. Why was this not known to us before?”

The FATF Report found each and every fault, crack, cleavage and hole in the country’s legal, administrative, judicial, security and political infra-structure.

It categorically states that corruption, drug trafficking, fraud, tax evasion, smuggling, human trafficking and organized crime are major predicate offenses to money laundering and areas of high risk.

The country’s public and private sectors have a low level of understanding of money laundering (ML) and terror financing (TF) risks, the report highlights. This, the findings said, is also apparent across Law enforcement agencies (LEAs) due to the lack of national, coordinated strategic leadership….

FATF has therefore left zero room for Pakistan’s political government, its Army or even the top judges, to be even mildly soft or accommodating on any point.

Commenting on the 10 key points above, a senior Pakistani analyst said, “Should this surprise us? A country where the head of the state runs parallel banking system to launder ill-gotten monies and the accounts of low paid servants were used to transfer billions of Rupees, FATF is just the mirror”.

“I will agree that our this gross disregard has been and is being exploited by forces inimical to Pakistan,” he adds. But take this as a God sent, we need to cleanse our banking and financial system from these black holes and establish a transparent financial environment”.

He takes the FATF conditions slapped on Pakistan beyond tree-top look at. “So I am not perturbed by FATF drubbing of Pakistan, rather it’s a golden opportunity”.

READ FULL COMMENT BY SHAHEEN SEHBAI:


SHAHEEN SEHBAI: Many in Pakistan and abroad have been wondering why PM Imran Khan has taken an extreme position against the corrupt politicians, saying repeatedly that he was prepared even to give up his government but he would not “spare the thieves”.

This position is grounded in his strong belief and conviction that it is critical to Pakistan’s existential dynamics.

But how correct Khan has been is now becoming clear, as this policy has turned into the only option to save Pakistan from a national suicide or a deep black hole that may drown and destroy everybody and everything.

This doomsday killer (or may be Covid-20) is called the FATF — the Financial Action Task Force — a much talked-about subject in headlines, as the October 2020 deadline to judge Pakistan’s performance creeps closer by the day to determine whether the country stays in the FATF Gray List or moves up or down.

Enemies like India want to push Pakistan down, in the Black List. Government officials have been trying hard to meet FATF conditions and official spokesmen keep claiming we have done a lot to avoid the Black List or the Gray List.

The truth, however, lies somewhere else.

No one has actually described in detail what the FATF thinks, wants and whether or what Pakistan can actually deliver, and how soon. The depth of FATF investigations and its findings are so nerve-wrecking, it becomes hard to fathom what else is left. It’s like a post-mortem of a dead body.

Only few, who are dealing with this matter, know and they are scared to talk about these hard facts in public, and understandably so. They have not much to say.

Thus rhetoric, propaganda and promises, politically motivated most of the time, continue to dominate the media narrative. The reality is mindboggling. The devil, as in all the cases, is in the detail.

The best and the only fact-based, incredibly detailed, public depiction of the FATF test is its October 2019 Pakistan Mutual Evaluation Report (MER) on Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) Measures.

FATF has 41 member states and Pakistan’s case was evaluated and assessed by 13 financial, legal and law enforcement experts from Maldives, Indonesia, China, UK, US, Turkey, New Zealand, Australia and IMF –none of them from any country or organization hostile to Pakistan.

Their evaluation is factual and objective and was based on the 2012 FATF recommendations and was prepared using the 2013 assessment methodology. Data and Information was provided by Pakistan and collected physically by an assessment team, which also made an on-site visit to Pakistan.

The 229-page 2019 MER came out as a gigantic graphic indictment of the failed Pakistan system, its broken laws, lack of commitment and coordination and was largely divided into two parts – Money Laundering and Terror Financing.

Prime Minister Imran Khan and his team understand what the Report contains and means and hence we now know why he has taken such a harsh stance. FATF has left zero room for Imran Khan, the Army or even the top judges, to be even mildly soft or accommodating on any point. That is the troika that matters.

Terrorism and terror financing was dealt with more effectively by the security establishment and Pakistan can largely convince FATF that it is seriously committed to meet the challenge. Many terrorist organizations have been banned and leaders arrested, their money seized, their hot spots busted.

These actions continue as Pakistan itself is fighting terrorism head on. It has suffered huge losses. Over 70,000 dead in terror attacks, but has also defeated it in what can be described as one of the best anti-terror wars fought by any country in recent years.

But the money laundering part of MER is a work in progress in the civilian domain and has far reaching implications and consequences, for the government, the political system and the country itself.

The FATF Report is so detailed and goes into every small and minuscule aspect of money laundering, as if the experts had put Pakistan under a super powerful microscope and found each and every fault, crack, cleavage and hole in its legal, administrative, judicial, security and political infra-structure and how it was deliberately destroyed by corrupt and selfish leaders.

It says: “Overall, with few exceptions, the public and private sectors have a low level of understanding of money laundering (ML) and terror financing (TF) risks in the country. This is also apparent across Law enforcement agencies (LEAs) due to the lack of national, coordinated strategic leadership….”

A very senior just-retired top bureaucrat of Pakistan, when asked to see the report and comment on it said: “I was about to get a heart attack. It’s such a hair-raising script. Why was this not known to us before?”

The Report made 40 recommendations and each was elaborately described in 695 paragraphs with a verdict at the end, whether Pakistan had complied, not complied or partially complied with the recommendation.

The marks Pakistan got were simply awful as political leadership in the last many years had acted in a way inimical to the country as if Pakistan was an enemy territory and they had captured it to loot and plunder.

Out of 40 only one, yes only one, recommendation was judged as “Compliant” and ironically it was about “Financial Institutions Secrecy Laws”. So Pakistan was judged good at keeping these matters under wraps.

Nine recommendations only got a “Largely Compliant” rating but deficiencies, inconsistencies, and shortcomings in the system, procedures, lack of rules etc were identified in detail and the task was given to do the needed corrections.

A rating of “Partial Compliance” was given to 25 recommendations and these included every aspect of Pakistan’s failure to check money laundering and terror financing.

It was stated in great detail how banks operations had shortfalls; what was needed to tighten NAB laws; what duty the State Bank failed to perform; how hawala and hundi were used; how inefficient and corrupt the law agencies were; how personal carriers like Ayan Ali operated; what were the gaps in national policies; how hides and skins of sacrificed animals were used for terrorism and money laundering; how various law enforcement agencies including NAB, FIA, Customs lacked coordination; how trusts and Waqfs were misused; what was the role of non-profit organizations, both local and international; and a lot of other minor and major faults and shortcomings.

One important point was how politically exposed persons (PEPs), or in simple words Pakistan’s corrupt political elite, were left outside the purview of law.

Likewise a Table published in the MER disclosed that in five years (2013-2018) the total number of money laundering cases investigated by various agencies was 2,420, of which 354 were prosecuted but only ONE case, yes ONE case of NAB resulted in a conviction.

We also now know why the Assets Recovery Unit headed by Barrister Shahzad Akbar was created. It was a FATF condition.

The Report is long but in short it states categorically that corruption, drug trafficking, fraud, tax evasion, smuggling, human trafficking and organized crime are major predicate offenses to money laundering and areas of high risk.

Para 15 starts with the damning note: “Corruption is endemic across Pakistan’s economy,” but it acknowledges: “Pakistan is to be commended for its recent initiatives to prevent and detect corruption. Pakistan authorities recognize that corruption is connected with a range of other predicate offenses.”

It also mentions the conviction of Nawaz Sharif as a case example.

With this horrifying scorecard, Pakistan now awaits another FATF assessment team in October and experts will question what had been done, or not done, on each of their previous recommendation.

So Imran Khan has this huge task ahead of him and he has to show progress on each point. He knows that failure will mean another negative report which straightaway means Pakistan either stays in the Gray List for many more months or it goes down in the Black List with disastrous and fatal consequences.

In this whole context no one in his right mind can think of going back on any of these issues by giving the politically corrupt leaders a reprieve or in simple words a NRO like concession, just for political stability or short-term gains.

It is now beyond Imran Khan, and even the military or the judicial establishment of Pakistan to show any weakness, when scores of cases of blatant money laundering of billions of dollars, through fake accounts and bank transfers have been unearthed. This would be immediately construed as lack of commitment to FATF goals.

So when the Opposition presented a 34-point list recently to defang and distort the NAB laws, it was a total non-starter and Imran Khan not only ridiculed it but correctly said the opposition was working against the interests of Pakistan, just to cover up its loot and plunder.

That is why when the Senate rejected FATF-related laws, because the Opposition has a majority, all alarms started screaming and now the joint session of parliament will adopt these laws, by hook or by crook, as they have turned into an invaluable, inevitable lifeline for Pakistan.

Even if there is any sympathy in any quarter for these corrupt politicians, no matter how much noise they make or dirty tricks they play, Pakistan just cannot afford to go on any other road.

It is now inevitable for the government, the saner elements of the opposition, and all other stakeholders in Pakistan, including the civil, military, judicial and political establishment, to come on this single page.

It has become a matter of sheer survival for Pakistan because even if all others collude and combine with the corrupt to win, that will mean a death sentence for Pakistan in the FATF Black Hole.

The politicians, military generals, superior judges, media barons, business tycoons, mafia dons, top bureaucrats, religious influencers and anyone who is someone, has to decide whether they stand with Pakistan or want it to go down the drain.

They must understand they will also go down in that drain.

Pakistan has only one choice — No Choice.