Tuesday, August 9, 2022

FATF regulations expensive to enforce and unfair to poor countries


Adil Ghaffar
Experienced Chief Executive Officer with a demonstrated history of working in the financial services' industry. Skilled in Negotiation, Business Planning, Microsoft Word, Accounting, and Team Building. Strong business development professional with an ACA focused in Accounting and Finance from institute of chartered accountants of Pakistan. Contact: [email protected]

It’s high time that Government of Pakistan should set it’s priority and choose between Anti Money Laundering (AML) and Documentation of Economy (DOE).

The Financial Action Task Force is an inter-governmental body established 1989 by the Ministers of its Member jurisdictions. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial systems

The FATF is therefore a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.

If we notice the objectives of FATF are solely towards financial system.

The entire world, yet again, following west as deaf and dumb, without realising or raising concerns as to the grass root reasons. Political leaders do not allow people to step in their domain else their shining politics will be tarnished. Grass root reasons for money laundering and terrorist financing are not unknown. If resolved, peace will prevail but political leaders and gurus will be on long leave.

If west can come up with FATF then surely Organisation of Islamic Cooperation (OIC) should also come up with something like FATF such as Countries Destroying Peace CDP and assigns Grey, black or red colour list to portray negative image to those countries.

If, for any reason, FATF does not consider grass root issues then atleast to a lesser extent it should consider giving Grey/Black list status to countries involve in producing arms and ammunition. When there will be NO arms and ammunition producer or a simple forensic audit of arms and ammunition producers, world-wide, would entail who are the beneficiaries and their customers. But who is going to go after the Lords of this world?

Risks associated with Grey/Black List

  • Global reputation i.e. negative image;
  • Impression that country’s financial system is weak;
  • Decrease in foreign investments;
  • Difficulties is securing loans from multilateral institutions.


Investment in National Saving Schemes on Cash basis is not AML but Documentation of Economy
AML is discouraging Documentation of Economy
Allowing non tax filers to acquire vehicles is not AML but Documentation of Economy
Investment in Real     Estate is not AML
Documentation of Economy

Pakistanis, as a Nation, and present regime as Government, have to decide whether it will be fruitful for Pakistan, as a Country, to join this western drive. It should be categorically clear as to what we are leading towards and what goals and benefits will Pakistan, as a Country, will achieve by implementing dictations from west.

Pakistan’s think tank, should debate openly the pros and cons of implementing laws, rules and regulations and evaluate it in the best interest of the country.

Pakistan, as a Country, drives more than 60% of its economic activities on cash basis. Where un-documented economy is at much larger scale. Even with worst law and order situation, majority of the people of Pakistan are comfortable with cash economy. There has to be a reason and when we ask FATF to visualize ground realities than we should also show courage to criticise different governments who failed to attract people of Pakistan toward main stream economy.

The substantial amount of money laundering from ill factors

  • · like drugs such as narcotics can also be addressed by individual sowing countries.
  • · From ransom etc.. require State’s will.
  • · From smuggling goods is something already in system.



The ill gotten wealth by political leaders through corruption can be found in following forms:

  • Bank accounts (benami);
  • Real estate (benami);
  • Cash foreign exchange; and
  • Cash local currency.
    Very unlikely these funds are routed through stock exchange

DO NOT BE MISTAKEN Calculate Risk and Rewards Perform COST vs BENEFIT ANALYSIS

In the current regulatory environment, it is very unlikely that stock exchange be used for money laundering purposes, particularly when capital gain tax rate is 15% and complete audit trail of bank and securities transfer are in place

Do not make mistake and do not surrender to the directions. It will be fatal for Pakistan’s fragile economy.

Before Anti money laundering laws, if government is really interested the demonetization of currency could give huge breathing space and signal.

It is indeed politically motivated, try to read between the lines. Just like the way Pakistan was kept busy with

  • War on terror for the last 2 decades;
  • Law & order situation over the last 3 decades;
  • Political, sectarian and religious issues.

Similar approach is now been floated to destabilise Pakistan economically. The people at the helm of affairs should take it as an economic war tactics, and play their part in the best interest of Pakistan.


We can avert pressures and all issues from being included in grey or black list through our political diplomacy and foreign policy but will not be able to come out of economic crisis and may not be to manage economic downturn.

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