FATF: Where do we go from here?

FATF: Where do we go from here?


Pakistan has formally written its protest to the Financial Action Task Force President regarding India being co-chair of the Asia-Pacific Group. The letter talks about the recent deterioration of political relations between India and Pakistan, the airspace violation and bombings inside Pakistan by India. There is also the backdrop of India’s Finance Minister claiming India will make all efforts to diplomatically isolate Pakistan including calls for its blacklisting during the International Cooperation Review Group (ICRG) meeting. 
It is important to note that this is not the first time Pakistan has raised similar concerns relating to India with FATF and related bodies. In June 2018, Pakistan informed the Asia-Pacific Group of India’s intent to isolate Pakistan and requested a revision of the joint group’s composition. Again, in February 2019, during the sideline meetings of the FATF plenary, Pakistan officially expressed its reservations to the ICRG co-chairs and FATF secretariat. But, despite all these legitimate concerns, not a single response has yet been received by the FATF.
Assuming that in the coming days, the FATF secretariat remains unsympathetic to Pakistan’s requests, what are the options going forward? 
First, Pakistan will need to proactively engage countries with the position and power to lobby for Pakistan’s case in FATF, Asia-Pacific Group and related bodies. At least eleven members of FATF are also members of the Asia-Pacific Group and they can be influential in advocating Pakistan’s principle stand. Other than India, these are Australia, Canada, China, Japan, the Republic of Korea, Malaysia, New Zealand, Singapore and the US. Pakistan’s diplomatic missions in these countries will need to engage relevant offices so that a more balanced treatment might be secured. 
Second, FATF’s demands require the capacity-building of relevant institutions in Pakistan. In this regard, organizations that provide technical support to the Asia-Pacific Group and that Pakistan has decades of working experience with, can be useful like the International Monetary Fund, the World Bank, the Organization for Economic Development, the United Nations, the Asian Development Bank, the Commonwealth Secretariat and so on and so forth.

It is important to understand that FTAF demands are too important an agenda to be left to the understanding and will of select institutions in the country.

Dr. Vaqar Ahmed

Third, taking a cue from the above mentioned, it is important to understand that providing better training to officials at local bodies like the FIA, National Accountability Bureau, the Securities & Exchange Commission of Pakistan, State Bank, and the Federal Board of Revenue is only one part of a three-pronged approach. The two missing elements in the past have been weak inter-agency coordination and a real willingness to go after money laundering perpetrators. After all, well before the FATF put Pakistan on its grey list, the country’s own National Action Plan (NAP) had already identified several missing measures required to curb both money laundering and terrorist financing. Why then, did Pakistan not act on its own plan is a huge question mark, and one which invites outside surveillance bodies to issue warning and take action.
Recently, the Prime Minister spoke about reforming the Federal Board of Revenue (FBR). This will be timely as a large segment of economic activity remains informal and often times goes undocumented. FBR claims that it has identified top tax evaders in the country – many of whom have either transferred or hidden their ill-gotten wealth abroad. These identification exercises are of little use if FBR lacks the capacity to go after the cases.
Even provincial revenue authorities collecting agriculture, land, property and transport related taxes must demonstrate the will and the capacity to reform. The lack of forensic audit skills at these authorities allows undeclared wealth to be parked under undeclared local currency bank accounts, foreign currency bank accounts, bearer certificates and real estate. In the case of real estate, it is well known that landowners rarely declare the actual market value of their assets in the tax department.
Lastly, it is important to understand that FTAF demands are too important an agenda to be left to the understanding and will of select institutions in the country. Well-intentioned officials at these institutions require the support of parliament, political leadership and intelligence agencies. In the same spirit, relevant Senate and National Assembly standing committees must create an urgency to meet FATF demands and save face from any further embarrassment for the country.
– Dr. Vaqar Ahmed is joint Executive Director of the Sustainable Development Policy Institute, Pakistan. His book ‘Pakistan’s Agenda for Economic Reforms’ was recently published by the Oxford University Press.
Twitter: @vaqarahmed

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