Pakistan scrambles to get off FATF’s gray listSeptember 16, 2013
The world’s leading financial standards body, FATF, alerted the international community earlier this summer that Pakistan and 11 other countries have failed to make sufficient progress in preventing money laundering and terrorist financing.
The newspaper Pakistan Today notes that if Pakistan fails in “coming up with proper and combating the financing of terrorism and anti-money laundering legislations the country may face severe financial sanctions that may affect its financial deals with the World bank, the Asian Development Bank and other top financial institutions” (h/t Zia Ur Rehman). Pakistan should make reforms prior to FATF’s next meeting in October to avoid such sanctions.
Not so coincidentally, Pakistan’s central bank has rolled out a new requirement for Pakistani financial institutions to adopt nationwide software by Sept. 30 that will facilitate the filing of suspicious activity reports by bank employees. When a certain customer or transaction is regarded as suspicious, the financial institutions would use this software to report their observations back to the central bank.
Anybody familiar with new software deployments, even under the best circumstances in well-developed high-tech nations, will recognize that this is an overly ambitious timetable to for implementation. Widespread training and adoption of the software is unlikely to be complete by FATF’s deadline, but the stated goal may be enough to persuade FATF that Pakistan is moving in the right direction.
Pakistan has been cited before by the Financial Action Task Force for its financial regulatory deficiencies. Despite the history of shortcomings, Western nations have continued to saturate Pakistan with foreign aid. Without adequate money laundering an CFT controls in place, there is a high risk of any such military and development aid being abused by malicious actors without fear of detection or prosecution.