Coming to grips with Financial Action Task Force dated 21st Nov, 2019

Syed Ali Kashif

Qualification: MBA from IBA, Karachi
DAIBP – Distinction On Pakistan Level In "Agricultural Credit" And Qualified "Accounting" & "Business Communication" From Institute Of Bankers In Pakistan(IBP)
Area Of Interest In Banking: Treasury & Funds Management , Sme, Investment Banking & Corporate Financing, SBP Export Refinance, Islamic Banking, General Banking & Human Resources Management

Syed Ali Kashif, MBA Class of 1996, after graduating from IBA joined banking sector, where he worked his way up from management trainee officer, to the position of Head of Export Refinance at one of the top-of-the-line Bank. In 2014, he joined a leading business house where he currently spearheads the Treasury Research. His areas of interest in Banking are Treasury & Funds Management, Investment Banking, Corporate Banking, SME Banking, Project Financing, SBP Export Refinance and Islamic Banking. As MBA professional from IBA, and as a keen professionally qualified senior banker, the exposure he accrued in banking lends him credence in the immense market potential of financial sector of Pakistan. This forms the underpinnings for his present preoccupation in financial research translating him into a prolific writer who has been chipping in with his insightful write-ups to the IBA Alumni e-Newsletter ever since it was initiated.


Proponents of the theory that Pakistan is a failed state will die-down and they themselves are the failed politicians and their script should be discarded and thrown in the dustbin. And these proponents along with their negative theories about Pakistan would in the final analysis will fizzle out since they hardly hold any water, that Pakistan will emerge unscathed from the Financial Action Task Force (FATF) review due this week (Oct 14th, 2019).

Pakistan is a strong-hold of Islam and any country hatching conspiracy against it will have to bite the dust and see a worst fate for its conspiracy. The PTI government is burning midnight oils to stop money-laundering by the culprits and key culprits are behind the bars, facing stringent court trials, languishing health-wise and making a beeline to intensive care units of various hospitals facing death-nearing health issues. It's time for them to return the looted and corruption money to the national exchequer voluntarily and avoid punitive action of courts.

Now apart from money laundering, the second issue is terrorism; which under the capable and competent leadership of General Qamar Jawed Bajwa, our Army could deal quite competently with it. These two issues of money-laundering and combating terrorism are at the core of FATF. Ongoing review processes for the world various countries including Pakistan.

The Financial Action Task Force (on Money Laundering) (FATF), as its French name suggests, Groupe d'action financière (GAFI), is an intergovernmental organization founded in 1989 on the initiative of the G7, which is a policymaking body whose purpose is to establish international standards, and to develop and promote policies, both at national and international levels, to combat money laundering and financing of terrorism. The year 2001 saw its mandate expanded to include terrorism financing.

The FATF has prepared a guidance paper to provide support to countries and their financial institutions in designing Anti-Money Laundering and Terrorist Financing (AML/CFT) measures that meet the national goal of financial inclusion, without compromising the measures that exist for the purpose of combating crime. Recommendations created by the Financial Action Task Force (FATF) target money laundering, terrorist financing, and other threats to the global financial system.

The President convenes and chairs the meetings of the FATF Plenary and Steering Group, and he/she oversees the FATF Secretariat. Xiangmin Liu of the People's Republic of China assumed the position of President of the FATF on July 1, 2019.

Pakistan has been in the watchdog's grey list since June 2018 for its alleged failure to adequately crackdown on terror financing and money laundering in the country... Last year was not the first time that Pakistan was placed in the FATF's grey-list. The country was on the list from 2012 to 2015.

Blacklisting would result in downgrading of the entire financial system. Pakistan had been on the FATF blacklist for years before it was removed in 2015 following "significant progress" in fighting terror financing.

The Financial Action Task Force (FATF) formally placed Pakistan on the grey list due to 'strategic deficiencies' in its anti-money laundering and terrorism financing regime. The highly anticipated decision was taken by the FATF Plenary that met in Paris on June 29, 2018. The global body took the decision based on a monitoring report of the International Cooperation Review Group (ICRG). The Joint Group is a sub-body of the International Cooperation Review Group (ICRG) of the Asia Pacific Group (APG). The Asia/Pacific Group on Money Laundering (also known as the APG) is the FATF style regional body for the Asia-Pacific region. It is an inter-governmental (international) organization founded in 1997 in Bangkok, Thailand. The APG has one permanent & one two-year term Chair.

However, there has been no official confirmation of these reports by Pakistan. A gray list is a list of stocks that are ineligible for trade by an investment bank's risk arbitrage division. The gray list composed of firms working with the investment bank, often in matters of mergers and acquisitions. Pakistan has been on the FATF's grey list since last year. Last June, Islamabad had committed to working with the FATF to strengthen its anti-money laundering and terror financing mechanisms. The official said despite its efforts, Pakistan could not convince the 41-member plenary to upgrade it on any parameter. In June, the FATF had warned Pakistan that its failure to complete its action plan on terror financing could possibly lead to the country getting blacklisted. Pakistan is a member of the APG, and its case is being presented before the FATF by the APG.

In connection with the FAT conditionalities, our all-time friends such as China, Malaysia and Turkey have offered their support which bespoke of the depth of our ties with these countries. As three of these countries have already qualified for the FAT conditionalities and are now FATF compliant nations.

The market is not totally able to shake off the fear of the FATF's blacklist. Yet investors are increasingly putting money on the table for deeply discounted Pakistani stocks.

The market has continued its winning streak for over 24 trading sessions, posting stellar gains of 3,540 points or 11.6 percent in the benchmark index, which closed on Friday at 34,475 points.

Based on the above reports, this writer is confident that Pakistan would stave off the FATF blacklist and be transferred from gray list to normal list in the next review expected in Feb 2020.

Most importantly, Pakistan has requested the FATF, to have in place most unbiased and fair review of its progress to FATF compliance, especially in view of its neighbor India's malicious campaign against Pakistan; and sources privy to this writer told that Indian malicious campaign against Pakistan would be foiled as Pakistan needed only three votes to have commanding position and we have Malaysia, Turkey and China's support in the FATF forum. So, Pakistan's chances to come out victoriously unscathed are very strong.