June 24, 2019 (MLN): Pakistan has been on the terrorism financing watchdog’s radar since June 2018, when it was placed on the FATF ‘grey list’ for terrorist financing and money laundering risks, arguing that Pakistan had failed to act against terror financing on its soil.
In order to abate the process of demoting Pakistan to the ranks of “High-Risk Jurisdictions” i.e. black-listing, the support of at least three member states was essential and Pakistan has managed to gather crucial support from member nations Malaysia, China and Turkey.
A research report by AKD Securities highlights that despite reported firm diplomatic commitments from the member nations, the likelihood of on-going AML/CFT monitoring process to continue is still high, where Pakistan is included amongst 12 jurisdictions which have shown strategic deficiencies, amongst the likes of Yemen, Syria, and Sri Lanka.
“As the ongoing efforts by the government have been proactive in addressing deficiencies, the inclusion of Pakistan in the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax matters lends added weight to government’s “big-ticket” measures (amnesty schemes, increasing declarations of foreign assets, raising the tax net),” says a report.
These information exchange regimes with foreign jurisdictions have been touted as a means to obtain details of foreign assets held by Pakistani citizens, which, if undeclared, are liable to be brought into the formal wealth base.
It further adds that Pakistan’s effort to comply with FATF guidelines would reduce the “systematic risk” in the market, with the market avoiding a potential idiosyncratic risk land-mine.
Therefore, the sectors such as Banks, E&Ps, and selected Power and OMCs would be benefitted in the current scenario of macroeconomic issues include higher interest rate, exchange rate and circular debt resolution.
