*LONDON: A new report by Britain’s Royal United Services Institute (RUSI)has identified a “mismatch in Pakistani and international illicitfinance-related priorities” where the international Financial Action TaskForce (FATF) priorities lay in counter-terrorist finance, whereas Pakistanipolicymakers feel the proceeds of corruption siphoned outside the countryshould have greater relevance.*
The report by the think tank identified the opportunities for Pakistan todrive up the integrity of its financial system, enabling the country’sleadership to address decades of illicit financial activity by taking stepsto stem the flow of proceeds of corruption siphoned off outside Pakistan.
The RUSI report recommended firm action against hawaladars operatingillegally and promote dialogue to address mismatch in priorities betweeninternational stakeholders such as the UK government, which is concernedabout the role of Pakistan-based organised crime in drug trafficking, andPakistani authorities, which view the UK as a magnet for corruptionproceeds.
It said that the State Bank of Pakistan and the Securities and ExchangeCommission of Pakistan should clarify ‘the interaction between tax andAnti-Money Laundering (AML) rules’.
The report relied on reports of Pakistani government stating thatsubstantial funds have been corruptly misappropriated from Pakistan bygovernment officials and transferred abroad.
Entitled “Security Through Financial Integrity: Mending Pakistan’s LeakySieve”, the RUSI report suggested that the country’s financial system is“the first line of defence against the exfiltration of corruption proceedsfrom Pakistan” while calling for “holistic anti-corruption strategies” thatare informed by an understanding of the vulnerabilities in Pakistan’sfinancial sector.
The report identified the need to publish statistics on enforcement actionsthat Pakistan’s government takes against regulated businesses because offinancial crime failings. Greater enforcement action is also recommendedagainst informal value-transfer systems, better known as hawala or hundi.
It said the mismatch in priorities is also seen in the UK-Pakistanrelationship. With the UK “universally seen as an enabler of corruption inPakistan”, the paper calls for an “open recognition of each other’sinterests and priorities can provide an impetus for more effectivecooperation both on corruption, which is of primary concern to Pakistan,and on organised criminal activities that the UK is anxious to address”.
A Middle East country is also frequently referred to, in the report, as apotent magnet for Pakistani money. The report suggested that the Pakistanigovernment “should seek a coalition of international support for pressinggreater responsibility and accountability from the government of the MEcountry for facilitating illicit financial flows from Pakistan, inparticular in view of the FATF’s upcoming evaluation of the UAE in 2019”.
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The report said that the UK is universally seen as an enabler of corruptionin Pakistan. “In part, this is a consequence of high-profile cases such asthat of Nawaz Sharif and Asif Ali Zardari, both of whom owned UK-based realestate. More broadly, there is a palpable feeling that the UK is a favoureddestination for dirty funds from Pakistan, and that UK law enforcementwould be able to reverse the situation if there were sufficient politicalwill to do so. In particular, there is a widespread awareness of recentlegislative developments, most prominently the introduction of UnexplainedWealth Orders, although there appears to be less understanding of theirlimitations.”
The report said that while the UK government has provided a raft ofmeasures to support Pakistani criminal justice capabilities, includingtechnical assistance programmes, the involvement of UK law enforcementagencies in Pakistan has been largely focused on combatting drugtrafficking, and therefore Pakistan is seen predominantly not as a sourcecountry of criminal proceeds (that is, of corruption) but as a destinationcountry for the proceeds of drug trafficking and proceeds of otherorganised criminal activities.
The report dealt with Pakistan’s banking system at length and pointed outthe loopholes in the system. It said that Faysal Bank was alleged to haveextended a $20 million loan to a company owned by the family of NawazSharif but the SBP’s inquiry concluded that neither Sharif nor his familyowned the company in question.
According to the US Department of State’s 2003 Human Rights Report, saidthe report, the creation of the NAB was largely a response to systemic bankfraud perpetrated by wealthy Pakistanis.
By: Murtaza Ali Shah
Source:link
