Page 10 - pakjuly-sept2018

Signature Qualification CA that Empowers to Lead PAKISTAN Being in the FATF grey list implies that Pakistan’s financial system is being confirmed as a risk to the international financial system due to its inability and limitations to prevent money laundering and combating terrorist financing. name was removed from the list in 2015. Being in the FATF grey list implies that Pakistan’s financial system is considered as a risk to the international financial system due to its inability and limitations to prevent money laundering and combating terrorist financing. An ambitious 10-point action plan is drawn whereby the country is now required to further address its counter-terrorist financing related deficiencies and implement a system to achieve the objectives of the action plan in order to avoid being black listed by FATF. Salient features of the action plan are: ▪ Pakistan is required to prove that terrorist financing risks are properly identified, assessed and supervision is applied on a risk-sensitive basis. ▪ Remedial actions are formulated and applied in cases of AML/CFT regime violations and that these actions have an effect on AML/CFT compliance by financial institutions. ▪ Controls are in place to identify risk of cash couriers being used for financing of terrorism. ▪ Relevant competent and supervisory authorities have to demonstrate that they are playing an effective role in the identification of criminal activities and taking enforcement actions against illegal money or value transfer Due to current political services (MVTS). ▪ Law enforcement agencies are also to exhibit that they are able to identify situation in the country and investigate widest range of terrorist financing activity and that the investigations and trials target designated persons and entities including coupled with the fact that administrative and criminal penalties. ▪ Effective enactment of targeted financial sanctions against all designated the economy is under deep terrorists is in place and applied strictly and without any condition. crisis from all sides, it is Potential impact on business and economy predicted that Pakistan may It is not very clear as to how Pakistan’s name on the grey list would ultimately affect the business and economy. However, due to current face numerous financial political situation in the country coupled with the fact that the economy is under deep crisis from all sides, it is predicted that Pakistan may face difficulties not only now but numerous financial difficulties not only now but also in the coming months. also in the coming months. Banking channel could be most aggressively affected as it is linked with the international financial systems. Costs of doing business will increase and situation for banks will become more difficult than it was between 2012-2015 when the country was last included in FATF grey list. However, the circumstances at that time were better as large banks like Habib Bank Limited, United Bank Limited and National Bank of Pakistan were working as correspondent banking channels and which helped trading and banking to run smoothly. The situation is no more the same. Under the current laws and regulations, it will become tough for Pakistani banks to work abroad like in USA and other foreign countries. Only last year, Habib Bank Limited paid a penalty of US $225 million to the department of Financial Services of New York State for violating multiple state regulations including illicit money transfers and had to shut down its operations over there as a consequence. Being in the grey list means the country does not have effective AML/ CFT controls in place. Banks and financial institutions (overseas) would be suspicious of undertaking transactions with Pakistani banks and financial institutions when considering the legal and other risks associated with it 8 The Pakistan Accountant July - September 2018