Dr. Ikramul Haq & Abdul Rauf Shakoori
The Financial Action Task Force (FATF) has released its Annual Report 2023-2024, under the Singapore Presidency of T. Raja Kumar. It highlights significant progress in the global fight against money laundering, terrorist financing, and the proliferation of weapons of mass destruction. The Report also emphasizes the FATF’s commitment to strengthening the global financial system, enhancing transparency, and addressing emerging risks.
Over 200 countries and jurisdictions have committed to implementing FATF’s global standards, which are continuously refined to respond to evolving threats. In 2023-2024, the FATF undertook two public consultations and one targeted consultation to ensure the standards remain relevant and pragmatic. Five FATF Recommendations were updated, and two guidance papers were published to provide practitioners with a robust toolkit to combat financial crime effectively.
The FATF also engaged with stakeholders through events like the Private Sector Consultative Forum (PSCF), which brought together over 250 representatives from the financial sector, non-financial businesses, and civil society. This engagement is crucial for understanding the latest developments in financial crime and strengthening partnerships to tackle them.
One of the most significant achievements of the Singapore Presidency has been the focus on asset recovery. The FATF adopted changes to its international standards on asset recovery for the first time since 1990, enhancing countries’ ability to swiftly recover crime proceeds and manage seized assets. The FATF-INTERPOL Roundtable Engagement (FIRE) forum was instrumental in supporting operational applications and improving global asset recovery efforts. The revised standards require countries to prioritize asset recovery, ensure competent authorities can trace criminal assets, and manage frozen or seized property effectively.
The FATF also emphasizes the importance of international cooperation in asset recovery, with countries expected to seek and provide constructive and timely assistance. These changes aim to remove the profit incentive from crime and ensure that recovered assets are returned to victims or reinvested in public goods.
The FATF has made significant progress in improving global transparency standards, particularly in beneficial ownership. In March 2024, the FATF published updated guidance on Recommendation 25, which focuses on the transparency of legal arrangements. This guidance helps public and private sector stakeholders understand and assess money laundering and terrorist financing risks associated with trusts and similar legal arrangements. The FATF has also supported countries in implementing beneficial ownership registries, dramatically improving transparency.
During the next round of mutual evaluations, the FATF will assess how well countries have implemented these new requirements, ensuring that loopholes allowing shell companies to be used for criminal activities are closed. This work builds on earlier efforts by the German Presidency to strengthen beneficial ownership transparency of legal persons, addressing long-standing issues that have facilitated money laundering and other crimes through shell companies and offshore incorporation centers.
The FATF revised Recommendation 8 to ensure that measures to protect non-profit organizations (NPOs) from terrorist financing abuse are targeted and proportionate. The updated Best Practices for NPOs, published in 2023, guides how to protect legitimate NPO activities while preventing misuse for terrorist financing.
The FATF has also clarified the assessment methodology for the next round of mutual evaluations, ensuring that risk-based measures are applied to protect vulnerable NPOs. This revision aims to prevent the over-application of FATF standards, which can inadvertently suppress civil society. The FATF’s proactive approach to addressing the misapplication of its standards reflects its commitment to balancing the need for security with the protection of legitimate NPO activities.
The FATF continues to monitor the implementation of its standards on virtual assets and virtual asset service providers (VASPs). In June 2024, the FATF published its fifth annual targeted update, revealing that 75% of jurisdictions are only partially compliant with this area of FATF Standards.
The FATF has published a table summarizing the steps taken by jurisdictions with materially important VASP activity, encouraging global implementation of the FATF requirements. This table highlights progress and encourages jurisdictions to take necessary steps to regulate or ban VASPs, reducing the risk of virtual assets being exploited for illicit finance. The FATF’s work in this area is extremely important, as the rapid growth of virtual assets presents new challenges for the global financial system.
The FATF Global Network, consisting of the FATF and nine FATF-Style Regional Bodies (FSRBs), plays a decisive role in implementing and enforcing international anti-money laundering (AML) and counter-terrorist financing (CFT) standards. The FATF prioritized activities to deepen its relationship with FSRBs, including providing increased support for mutual evaluations and institutionalizing the annual FATF-FSRB High-Level Meeting.
The FATF has greatly focused on training and support activities, with over 4,000 e-learning courses completed by June 2024. The Joint Assessor Training (JAT) programme trained 209 experts from the Global Network, ensuring a qualified pool of assessors for the next round of mutual evaluations. These efforts aim to strengthen the Global Network and ensure consistent implementation of FATF standards across regions.
The FATF is nearing completion of its fourth round of mutual evaluations, with 91% of Global Network mutual evaluation reports adopted by June 2024. The FATF has published follow-up reports for eight members, reflecting improvements in their AML/CFT frameworks. However, two downgrades are reported, where countries could not implement revised criteria.
The FATF has completed a horizontal review of measures to prevent designated non-financial businesses and professions (DNFBPs) from being misused for money laundering and terrorist financing.
The review highlights that seven FATF members, representing over half of the world’s GDP, fall below a 50% compliance score. This highlights the need for continued efforts to strengthen the regulation of DNFBPs, which are often exploited by criminals for high-level corruption.
The FATF continues to identify and address emerging risks to the global financial system. In November 2023, the FATF, in partnership with the Egmont Group and INTERPOL, published a report on illicit financial flows from cyber-enabled fraud (CEF).
The Report emphasizes the need for better victim reporting, data analysis, and domestic coordination to combat CEF effectively. The FATF also published a report on the risks of crowdfunding platforms being exploited for terrorism financing, highlighting the need for robust regulatory measures and enhanced cooperation among authorities, financial institutions, and platform operators. These reports are crucial for raising awareness and driving action to mitigate contemporary risks.
The FATF is a member-driven organization, with decisions made by consensus at the Plenary, which includes all its members. The Singapore Presidency institutionalizes measures to ensure an FSRB Executive Secretary is represented on the Steering Group, enhancing transparency and inclusiveness.
The FATF Secretariat, led by Executive Secretary Violaine Clerc, supports the work of the FATF and its Global Network. The Secretariat conducted 230 outreach missions across the Global Network, providing training, on-site visits, and engaging with stakeholders. These efforts are essential for building trust, fostering collaboration, and facilitating nuanced dialogue on complex issues.
Under the Singapore Presidency, the FATF has achieved significant milestones, including strengthening global compliance with FATF standards and preparing for the next round of mutual evaluations. The FATF has improved transparency and beneficial ownership standards, leading to numerous countries committing to implement beneficial ownership registries.
The revision of the FATF Standard on NPOs ensures that measures are well targeted and proportionate, preventing the over-application of FATF standards. The FATF prioritizes activities to deepen the relationship with FSRBs and promoted gender inclusivity through the Women in FATF and Global Network initiative. The FATF also addresses emerging risks, including cyber-enabled fraud, ransomware, and the misuse of crowdfunding platforms for terrorism financing.
The second FATF Plenary under the Mexico Presidency of Elisa de Anda Madrazo will take place from 19-21 February 2025, concluding FATF Week, starting on February 17, 2025. Delegates representing over 200 members of the Global Network and observer organizations, including the IMF, UN, World Bank, INTERPOL, and the Egmont Group, will participate in the Working Group and Plenary meetings in Paris.
The Plenary will discuss key developments in the fight against illicit finance, including a new FATF project to detect, disrupt, and investigate online child sexual exploitation. Moreover, strengthening financial inclusion through a risk-based implementation of the FATF Standards will also be a key priority. The Plenary will review progress made by jurisdictions identified as presenting a risk to the financial system. A summary of the Plenary’s decisions will be published on the FATF’s website, and a press conference will be held on February 21, 2025 at 16:30 CEST to announce the outcomes.
FATF has done a tremendous work in the last few years. Pakistan being a member of the Asia Pacific Group, known as regional arm of the FATF, remained on its ‘Grey List’ for a long time, indicating strategic deficiencies in its AML/CFT framework. Pakistan needs to enhance beneficial ownership transparency by implementing a centralized beneficial ownership registry to address these challenges. This would improve transparency and prevent the misuse of shell companies for money laundering and terrorist financing.
Pakistan should also strengthen asset recovery mechanisms by enhancing the capacity of law enforcement agencies to trace, freeze, and confiscate criminal proceeds. Pakistan must also ensure that measures to prevent the misuse of NPOs for terrorist financing are targeted and proportionate, avoiding undue disruption of legitimate activities. Finally, increasing international cooperation with FSRBs and other global partners is essential for addressing cross-border financial crime and improving information sharing.
By taking these steps, Pakistan can strengthen its AML/CFT framework, address the FATF’s concerns. The FATF Annual Report 2023-2024 highlights the organization’s ongoing efforts to combat financial crime, enhance transparency, and address emerging risks. Under the Singapore Presidency, the FATF has achieved significant progress in strengthening global compliance, improving beneficial ownership transparency, and protecting NPOs from misuse.
The upcoming Plenary under the Mexico Presidency will further advance these efforts, with a focus on financial inclusion and addressing emerging risks. For Pakistan, the path forward involves implementing robust measures to address its AML/CFT deficiencies and enhancing international cooperation to strengthen its financial system.
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Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, media, and cyber laws, ML/CFT, IT, intellectual property, arbitration, and international taxation. He studied journalism, English literature, and law. He holds an LLD in tax law with a specialization in transfer pricing.
He was a full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner.
He is the Chief Editor of Taxation. He is the country editor and correspondent of the International Bureau of Fiscal Documentation (IBFD) and a member of the International Fiscal Association (IFA). He is a Visiting Faculty at the Lahore University of Management Sciences (LUMS) and member Advisory Board and a Visiting Senior Fellow of the Pakistan Institute of Development Economics (PIDE).
He has co-authored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (Revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law, Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is the author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, and its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal). He regularly writes columns for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines, and newspapers at home and abroad.
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime, and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies, and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, and cross-border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career, he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and has also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study-driven scenarios and exams to ensure knowledge transfer.
His notable publications are Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan Rauf’s Research on Labour Laws and Income Tax, and others.
His articles include Revenue Collection: Contemporary Targets vs. Orthodox Approach, It is Time to say goodbye to Our Past, US Double Standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly listed Pakistan, Corruption is No Excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF Secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge,.
The recent publication, coauthored with Huzaima Bukhari, is
Pakistan Tackling FATF: Challenges & Solutions
available at:
https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35
https://www.amazon.com/dp/B08RXH8W46