New Delhi: A report card on Pakistan by a regional terror financing watchdog has found a series of critical gaps in Islamabad’s efforts to curb the flow of funds to and reduce the activities of proscribed terror groups like Jamaat-ud-Dawa and Lashkar-e-Toiba.
The Asia Pacific Group on Money Laundering, the regional affiliate of the Financial Action Task Force (FATF), had adopted Pakistan’s Mutual Evaluation Report at the annual meeting in Canberra on September 12. It was, however, released publicly only on October 2.
After the Canberra meeting in August, the Pakistan finance ministry admitted that it had been listed for an “enhanced follow-up”.
According to FATF guidelines, a country can either be put in regular follow-up – a default list comprising all countries – or in enhanced follow up. The second category is for members with “significant deficiencies (for technical compliance or effectiveness)” in their Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) systems.
The scale on which a country’s technical compliance levels are rated ranges from ‘Compliant’, on to ‘Largely Compliant’, then ‘Partially Compliant’ and ends at ‘Non-Compliant’.
As seen by The Wire, the report stated that Pakistan was marked ‘Non-Compliant’ on five FATF recommendations, ‘Partially Compliant’ on 25 others and ‘Largely Compliant’ on nine points. There was only one recommendation that Pakistan was found to be 100% ‘Compliant’ in and it related to financial institution secrecy laws.
In his speech at UN General Assembly on September 27, Pakistan prime minister Imran Khan said that he ‘recognised’ India’s ‘agenda’ of “trying to push Pakistan into the blacklist of the Financial Action Task Force to bankrupt the country”.
For India, Pakistan’s inclusion into the FATF ‘grey list’ was vindication of its position on Islamabad’s apparent lack of sincerity in taking action against terror groups operating from Pakistani soil.
The assessment by APG – and the drafting of the mutual evaluation report – is part of a multi-pronged process to determine whether Pakistan will escape the grey-list or sink further into the ‘black list’, which could attract sanctions. The final review of Pakistan will likely be taken up at the next meeting of the FATF in Paris between October 13 and 18.
The APG’s Mutual Evaluation Report (MER) was based on information provided by Pakistan, as well as the field visit by an assessment team in October last year. The six-member team comprised experts from the United States, Maldives, China, Turkey, Indonesia and the United Kingdom.
Under the 2017 National Risk Assessment (NRA), Pakistan has evaluated itself to be at ‘medium’ risk from terrorist financing and money laundering, but the report pointed out that Pakistani authorities were “not able to explain fully how it arrived at those ratings and what the rating system means”.
“For instance, when asked what the difference between medium and high were, the authorities provided no cogent explanation,” it said.
The report found “gaps” in the NRA, including that there was “no analysis known to be operating in Pakistan and how these organisations were funded”.
At the time of the visit of the assessment team, there were 66 organisations and approximately 7,600 individuals proscribed in Pakistan under UNSC Resolution 1373.
In fact, the report said that “notwithstanding” Pakistan’s self-evaluation, it faced “significant risks” of terror financing. These included ‘weak or no’ regulation of certain sectors like hawala, non-profit organisations and Designated Non-Financial Businesses and Professions.
Porous borders and geographical links with Afghanistan and Iran was also cited as a reason for Pakistan’s high-risk status.
“Also, terrorist groups operating in Pakistan are reported to include, but are not limited to, ISIS-Khorasan, Tehrik-e Taliban Pakistan, Quetta Shura Taliban, Haqqani Network, and Lashkar-e-Taiba (including its affiliates Jamaat-ud-Dawa and Falah-i-Insaniat Foundation), which raise funds through a variety of means including direct support, public fundraising, abuse of non-profit organisations, and though criminal activities,” said the report.
India’s had repeatedly stated that Pakistan does not implement sanctions regime against UN proscribed individuals like Hafiz Saeed. The report agreed that Pakistan has “not taken sufficient measures to fully implement UNSCR 1267 obligations against all listed individuals and entities – especially those associated with Lashkar-e-Tayyiba/Jamaat-ud-Dawa, and Falah-i-Insaniat Foundation, as well as the groups’ leader Hafiz Saeed”.
It specifically mentioned Pakistani media reports on Falah-i-Insaniat Foundation raising funds for relief aid and operating ambulance fleet, “which calls into question whether the prohibition on providing funds and financial services was being fully implemented”.
In its assessment about the specific issue of investigation into terrorist financing cases, the report noted that Pakistan has a “high-level commitment to fighting terrorism”. But, it held that the prosecution and investigation had “not been fully integrated into a national strategy in-line with Pakistan’s terror-financing risks”.
Pakistan claims to have registered 228 terrorist financing cases and convicted 58 individuals since 2015. Forty-nine of these convictions were in Punjab province alone, with 30% concentrated within six months in 2018.
The APG’s report observed that Pakistan did not provide detailed information on these cases. The ‘general’ data provided to the on-site team was that most of the cases from Punjab related to collections of donations by Al-Qaeda, Jamiat ul-Ansar, Sipah-e-Sahaba Pakistan, Jaish-e-Mohammed, Lashkar-e-Jhangvi and Ahlus Sunnah Wal Jamaah Association.
In Sindh and Khyber Pakhtunkhwa, most of the 100 cases related to extortion and kidnapping for ransom by persons related to these terror groups. Pakistan also informed that most investigations n Balochistan were associated with ISIS, Tehrik-e Taliban Pakistan and Lashkar-e-Jhangvi.
However, the national terrorist financing investigation agency, Federal Investigation Agency (FIA), had registered only three cases, one of which was “related to an attack in a foreign country in 2008”. This is, presumably, related to the Mumbai 2008 attacks, which India asserts was masterminded by JuD’s Hafiz Saeed.
Pakistan informed the APG team that it has frozen 36 bank accounts worth $69,492 belonging to UNSC 1267 designated individuals and entities, including that of Falah-i-Insaniat Foundation and Jamaat-ud-Dawa. It also provided a list of properties and assets seized from these groups.
The report assessed that the value and number of accounts frozen was “not fully consistent with Pakistan’s TF risk profile, particularly in recent years”.
Particularly on the seizure of JuD and FiF property, the report remarked that Pakistan did not demonstrate an effective asset management of this frozen property or that it supported broader counter terror strategy. “For example, Pakistan provided no information on the prosecution of individuals and entities associated with the frozen property relating to TF, and continued freezing actions against Falah-i-Insaniat Foundation, Jamaat-ud-Dawa and and other regional terrorist networks,” it stated.