Anti-Money Laundering Agency Keeps Pakistan on Watch List

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A global anti-money laundering watchdog kept Pakistan on its monitoring list asking the South Asian nation to improve controls on terrorist financing while lauding authorities for recent progress.

The Financial Action Task Force strongly urged Pakistan to complete its action plan by February, following a three-day meeting. Pakistan has largely completed 21 of 27 tasks, while it has made varying levels of progress on the rest of the plan, the Paris-based watchdog said in a statement. At the last review in February, Pakistan had largely completed 14 tasks.

The decision to keep Pakistan on its so-called grey monitoring list means the country will escape being bracketed with North Korea and Iran in the blacklist, and avoid tough sanctions on its banking system, which is already reeling from the impact of the coronavirus. The International Monetary Fund had warned that a downgrade could cause capital inflows to freeze and jeopardize its $6 billion program.

“As long as we see a country is progressing in action items, and we have seen progress with Pakistan, we give them a chance to repair the outstanding issues,” Marcus Pleyer, president at FATF, said in a press briefing. An on-site inspection will happen once the action items are completed before a country is removed from the monitoring list, he said.

FATF removed Mongolia and Iceland from its monitoring list citing significant progress in addressing deficiencies.

Prime Minister Imran Khan’s government escaped a downgrade after showing progress. The measures include identifying and supervising terror financing risks and boosting controls on illicit currency movement. Pakistan has been on FATF’s monitoring list since 2018 and failed to meet four previous deadlines for completing the program.

Khan’s administration has since amended 15 laws to address shortcomings, and is also improving the capacity of the law enforcement agencies to carry out investigations and prosecution of money laundering cases, according to the finance ministry.

The six remaining tasks are “serious deficiencies,” Pleyer said.

Pakistan had also been looking for diplomatic support in FATF, which includes 37 countries and two regional organizations. China, Turkey and Malaysia have lobbied to prevent severe penalties in the past. India, which accuses Pakistan of funding militant groups operating in its portion of Kashmir, had lobbied strongly for a downgrade.

At the meeting, India offered evidence on its claim that Pakistan continued to support terror groups, according to people familiar with the matter.

India included evidence it said proved the suicide attack that killed 40 India soldiers in Pulwama last year had been planned in Pakistan, the people said, asking not to be identified citing rules speaking to the media.

FATF did not respond to a request seeking comment on India’s presentation.

India also pointed to weapons recovered in Kashmir in recent weeks, and Pakistan’s lack of efforts to throttle financing to terrorists including Masood Azhar, Zaki-ur-Rehman Lakvi and Dawood Ibrahim, the people said.

Pakistan needs to continue working on its deficiencies that include the ability of law enforcement agencies to identify and investigate terror financing activities and implementation of sanctions against all designated terrorists and their associates, according to the FATF statement.

©2020 Bloomberg L.P.

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