Daily Times

Improving Inter-Agency Coordination

The following measures have been taken for enhancing inter-agency cooperation between the federal and provincial governments: The Ministry of Foreign Affairs convenes regular meetings of stakeholders to discuss matters relating to implementation of UNSCRs. In December 2017, the Ministry of Foreign Affairs organized an awareness session to educate all concerned stakeholders on the new obligations arising from the UNSCR 2368 adopted in July 2017.

In order to further strengthen the oversight mechanism and to improve coordination between the concerned departments at the Federal and Provincial levels, National Counter Terrorism Authority (NACTA) has established a National Task Force on combating financing of terrorism in July 2017 having representation from all relevant Federal and Provincial authorities involved in combating terrorism financing. This Task Force comprises 27 members which include FIA, FBR, ANF, SBP, FMU, SECP, all the provincial CTD’s, provincial Home Departments, Ministry of Finance and Interior etc. The pace of implementation of FATF action plan has picked up considerably as a result of these meetings.

In addition to above, the General Committee (formed under section 5 of the AML Act, 2010) has convened around dozen meetings since July 2017 to discuss matters relating to AML/CFT and in particular issues relating to FATF. This committee consists of Secretaries Finance, Law, Interior and Foreign Affairs, Chairmen NAB and FBR, Directors General FIA and ANF, Deputy Governor SBP and Commissioner SECP. The DG FMU acts as its secretary. These meetings have resulted into creating a momentum for a concerted drive against combating ML/TF and its impact is getting trickled down to the operational level.

Since August 2017, NACTA issued National Guidelines for regulating hides/charity collection to all civil and law enforcement authorities of the country. As per guidelines, NGOs, NPOs, etc. desiring to collect hides of sacrificial animals would be required to obtain NOC from the office of Deputy Commissioner as well as for publishing any printed material or verbal announcements for hides/funds collection. NACTA in 2018 also signed a MoU with Pakistan Centre for Philanthropy (PCP) to streamline the flow of charity into right hands and to promote safe donations through certified organizations.

Prior to the above, NACTA issued directives to all authorities on 01st May, 2017 regarding fund raising in cash or kind by NGOs/NPOs & Charities during the holy month of Ramadan. The directive mentioned that fundraising by proscribed/listed entities and persons from the public is a serious offence.

The assessment process should have particular focus on risky geographical locations based on available information and institution’s own judgment in line with risk based approach

Actions taken by State Bank of Pakistan

The State Bank of Pakistan has put in place a comprehensive regime of regulations and guidelines for effective implementation of the UNSCR 1267 sanctions and to ensure that no financial services are provided to illegal entities. The SBP has taken a number of additional actions to reinforce the earlier measures.

SBP has directed institutions under its ambit to conduct thorough screening of accounts to ensure that all bank accounts, funds and other financial assets are frozen in line with legal and regulatory requirements. The State Bank of Pakistan is also following the FATF’s instructions of knowing your client/customer policy.

The screening/ assessment process should have particular focus on risky geographical locations based on available information and institution’s own assessment/ judgment in line with risk based approach. In case of entity accounts, it should be ensured that their beneficial owners, directors, members, trustees and authorized signatories are not directly or indirectly linked with any proscribed/ designated persons, whether under the same name or with a different name. Internal audit or compliance function should regularly assess and validate the compliance of Statutory Regulatory Orders (SRO) by way of review and name screening. SBP continues to enforce the compliance of SROs in letter & spirit through a systematic process of on-site inspection and off-site supervision. Inspection departments of SBP keep fully updated version of list of individuals and entities subject to UN sanctions and check the compliance of account freezing instructions during the course of inspection. As a result of these inspections, SBP has imposed penalties on different Banks and Financial Institutions for violations of ML/TF directives.

In 2019 penalties amounting to Rs 247 million have been imposed on 11 financial institutions for weak screening procedures and Rs 31 on different banks for not meeting bio-metric verifications. Moreover, SBP has punished three banks with heavy penalties of Rs. 133.3 million for the violation of its prescribed rules and regulations in September 2019. These banks are Meezan Bank, Askari Bank, and MCB Islamic Bank . Stern action was taken against these banks as part of the steps taken by the government to be removed from the grey list of Financial Action Task Force (FATF). Recently, SBP has initiated a focused risk based thematic inspection of financial institutions to assess the screening processes and compliance of SROs issued by the Government. The SBP and SECP are also following the FATF’s instructions of Know Your Customers (KYC) and Customers Due Diligence (CDD).

In spite of the efforts taken by Pakistan that has been discussed above, FATF approved Pakistan’s nomination in International Cooperation Review Group (ICRG) process in its Plenary held in February 2018. This was a sudden move as action plan for Pakistan was not on the agenda. Instead action was taken on the concerns raised in the nomination paper by the countries. This is popularly known to be an India-US led move.

In the first FATF plenary on Pakistan the friendly countries namely Saudi Arabia, Turkey and China opposed the Indian instigated US led move to place Pakistan in the Grey list. However on February 22nd, the US in an unprecedented manner pushed for a second discussion on Pakistan. By then, the US had convinced Saudi Arabia to give up its support for Pakistan and promised a full FATF membership in return. The support of remaining two countries was not sufficient to stall the US move of placing Pakistan on the FATF grey list. Therefore the Chinese informed Pakistan that they have decided to opt out as they did not want to “lose face by supporting a move that is doomed to fail”. Pakistan appreciated the Chinese position and conveyed its gratitude to Turkey for “continuing to support Islamabad against all odds”. This has been termed as a diplomatic failure by some circles but others opine that there is a limit to getting support of a friendly country at International Forums on an issue where our own house needs to be put into order.

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The writer has done MPA from Institute of Administrative Sciences (IAS) Lahore