Pakistan remains susceptible to high risk of being placed on the FATF watch-list, the country is striving hard to get out of the enhanced scrutiny being meted out. In response to the compliance report to the task force, the FATF’s Joint Group has directed 150 questions to Pakistan, seeking clarifications and tangible actions taken against the seminaries affiliated with proscribed outfits. Financial funding is considered as a lifeline of terrorist organizations operating within the territorial realm of Pakistan and it is considered necessary to expurgate this lifeline first, followed by other strategic measures. IMF has also become critique for the lack of strategic measures against terrorist financing by emphasizing that the existing framework is flawed, the system needs streamlining and improvement. It stresses that the country may squeeze in accessing external financing if it is blacklisted. Surely enough, it will be difficult for Pakistan to attain external debt finance. However, the IMF has already changed the time horizon for compliance with the FATF from October 2019 to June 2020. In order to protect the financial system, the countries should adopt measures to insulate the system, where the banking system functions in isolation from the counterterrorism apparatus, tracking terror financing remains a huge challenge for the country. Terror financing involves funding or financial support of individual terrorists or armed non-state actors. Terrorists primarily raise and move funds from sympathizers or supporters to run their criminal actions for a wide range of purposes. Such groups transfer illegal funds from one location to another through the formal financial system, non-profit and charitable organizations. The criminal proceeds are meant to disguise the illegal source. In other words, money launderers and terrorists do not leave any trace or footholds of their criminal activities. The typical financial crime is a great threat to the integrity of the formal financial system. Financial Action Task Force (FATF), Paris based an inter-governmental organization established in 1989, in its last meeting placed Pakistan on the Grey List of countries and has linked Pakistan with unsatisfactory steps to curb money laundering and terrorism financing. The country will have to adopt indirect ways to trace such crime and this can only happen after assessing and enforcing the current laws. The watchdog has reviewed the gambit of measures and concluded that domestic laws are weak and unable to wrestle the challenges of the grave problem. Historically as a negotiating strategy, Pakistan has been pressuring and linking aids to performance parameters for strengthening ties among countries. Concurrently, the covert action has been taking place, the international community used a morphotic platform – FATF as a vehicle poses a complex challenge to Pakistan, and reinforcing financial restrictions in a candid bid to tighten the noose around the country. The current strategy has its own merits, and it seems the country is moving to reform and tightening up its formal financial system. However, how effectively to deal with terror financing, it still remains a formidable challenge. All evidence is suggestive of how to make a counter-terrorism policy more efficient, how to prosecute individuals, to proscribe groups and organizations involved in terror financing. And to explore more effective actions by law-enforcement organizations. Despite the grim litany, the issue has been a national priority being focused under the National Action Plan. Notwithunderstanding, the prevailing situation not seems satisfactory, Pakistan has largely addressed 5 out of 27 action items, with varying levels of progress made on the rest of the action plan. In line with the substantive measures against TF risks, the government of Pakistan in a bid to reform decided to hire a commercial bank to scrutinize Rs4 trillion deposits retained of four million Pakistani nationals with the Central Directorate of National Savings (CDNS). The outstanding deficiencies were highlighted by FATF – to address remaining gaps and technical deficiencies in the TF and related regulatory frameworks and demonstrating implementation. The Ministry of Finance has expressed interest in attracting and inviting bids from the interested commercial banks to enter into a third party agreement to enforce Anti-Money Laundering and Combating Financing of Terrorism regulations in the CNDS and/ or the Post office. The government has devised a plan to scrutinize all the existing account-holders within six months. The objective of risk profiling of the accountholders can well be achieved by December next year in order to meet the much-awaited FATF standards. IMF has also become critique for the lack of strategic measures against terrorist financing by emphasizing that the existing framework is flawed, the system needs streamlining and improvement The move will, for the first time, open four million accounts reflecting Rs4 trillion deposits as of the end of October 2019. The funds shall be subject to scrutiny by a private party. The potential third party will screen and perform due diligence of these accounts and will provide the basis for developing the risk profiles. The risk profiles of account-holders will conveniently facilitate the identification of all account activities. It requires monitoring on a continuous basis for all complex, unusual and suspicious transactions. The measures aimed at combating terrorism and terrorist financing through the implementation of the United Nations (Security Council) Act, 1948 (XIV of 1948), the Anti-Terrorism Act 1997 and the Anti-Money Laundering Act (AMLA) of 2010. The FATF has placed Pakistan on its grey list with effect from June 2018 and the forthcoming review on the implementation of the FATF Action Plan will take place in February 2020. Before that deadline, the Joint Review Group of the Asia Pacific Group will review Pakistan’s compliance status in the third week of January 2020. The government’s decision to engage a private party to perform the task underscores that it lacks the capacity and planning despite the country being on the grey list for the last almost one and a half year. In order to pursue a critical task, the finance ministry has decided to outsource a function by involving a third party, must concentrate on inhouse capacity building to perform the monitoring, diagnosis, and treatment tasks. The director-general of the CDNS declined to comment on the matter regarding the involvement of the third party in performing at a greater capacity. National Savings Bureau (NSB) was set up to boost financial savings in the economy and subsequently, the Bureau has changed the name as Central Directorate of National Savings (CDNS) in 1953 with its functions, policy matters, and execution of various saving schemes. In September 1960, it was decided to restructure the organization of CDNS in order to make more compatible with economic requirements. The directorate was given the status of an Attached Department of the Ministry of Finance. The CDNS is required to sell approved government debt instruments and responsible for promoting investment schemes to the general public. The CDNS collects proceeds of these securities through physical sale points i-e National Savings Centres and deposit into the federal government’s SBP account. The directorate also offers some attractive welfare-oriented financial products such as long-term bonds, saving certificates and schemes and pensioners and widower benefit accounts. National Savings is the leading investment and financial institution sprawling across Pakistan with an impressive portfolio and investors are served through a large network of 376 branches nationwide. Out of 154 saving centers are still run manually within the country. With the emerging requirements, the Finance Ministry had decided to undertake the computerization project covering all the branches it operates within the span of 10 years period, for the benefit of all, unfortunately, the completion of the project remains to be seen. The AML/CFT Mutual Evaluation Report (MER) of Pakistan that the Asia Pacific Group made public in October this year has identified glaring deficiencies in the vital financial organs of the country, CDNS and Pakistan Post – generates requisite funds for the Government to finance the budgetary deficit and infrastructure projects. The report says that although banks have made some impressive efforts to comply with the sanctions regime, the CDNS, and Pakistan Post have a very limited understanding of their ML/TF risks and AML/CFT obligations and are yet to enforce the preventive measures against Terrorist Financing and Money-Laundering. The AML/CFT MER has revealed that certain inherent weaknesses found which indicates CDNS, Pakistan Post and DNFBP (Designated Non-Financial Business or Profession) have non-existent STR reporting requirements. The APG findings unveiled the circumstances where Pakistan Post and CDNS are reporting entities under the Anti-Money Laundering legislation, however, the country has not established criteria in its AML/CFT regime to enforce the requirements and in part, these entities have limited understanding of AML/CFT obligations. In its MER, the APG has recommended that based on a comprehensive understanding of the ML/TF risk associated with CDNS, Pakistan Post, and DNFBPs, the ambit of specific AML/CFT obligations should be expanded to the reporting entities. The non-banking financial institutions are not filing suspicious transactions commensurate with ML/TF risks in the underlying sectors. The report underscored that there were no enforcement efforts made of complying with AML/CFT requirements for Pakistan Post, CDNS and DNFBP entities. Finding little evidence to substantiate the view that the Securities and Exchange Commission of Pakistan’s (SECP) supervisory activity is improving anti-money laundering and countering the financing of terrorism measures in Pakistan. Startlingly, Pakistan Post, CDNS and DNFBP entities were not supervised adequately for AML/CFT compliance regime. The CDNS and Pakistan Post identify customers under rules-based policies using CNICs with their use of other sources of reliable, independent and credible source documents and data or information to substantiate the identity of the users being considered. FATF – global watchdog on dirty money has categorically taken exception to Pakistan. The country has to comply with international norms to combat terror financing (TF) and money laundering and take additional counter-measures to be imposed on the financial system. FATF has strongly urged to take action if significant and sustainable progress not be made across the full range of its action plan by the next Plenary Session. FATF again expresses serious concerns and repercussions for the overall lack of progress by Pakistan and to address its TF risks, including remaining strategic deficiencies. It requires Pakistan to complete its comprehensive action plan expeditiously within proposed timelines and tackling the underlying TF threats emanating from the territorial jurisdiction it controls. The writer is a freelancer