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Introduction

Money laundering is the process of concealing the origins of money obtained illegally by passing it through various banking transfers or commercial transactions 1.  The Vienna Convention has made clear that money laundering should be criminalised together with the criminal financing of terrorism under the Terrorist Financing Convention.

 

Discussion

This paper provides a critical analysis of anti-money laundering policies and legislation in Pakistan and outlines the reforms needed to bring about effective change.

Overview

Pakistan continues to face challenges and threats due to significant levels of money laundering undertaken nationally on a daily basis by citizens of Pakistan, foreign nationals and corporate bodies, all of which is significantly increasing criminal activities such as corruption, trafficking and violence.

 

Money launderers in Pakistan are filling their pockets by illegal ways and misusing their power and position for the lust of wealth and money 2. Money laundering has a detrimental effect on Pakistan society, affecting its economy, community, government and the general social wellbeing of the state 3. It allows wrong doers and lawbreakers to enjoy illegal actions ‘without the noticing of law enforcement’ 4.

 

Money laundering acts as a barrier to the progress and development of the country by causing the growth and development of financial crises and poverty in Pakistan. There are many high profile cases concerning money laundering in Pakistan, a recent example being the case of former Prime Minister Nawaz Sharif.

National Accountability Courts

National Accountability Courts have also been established specifically to hear cases in the public interest concerning public officials charged with money laundering and related offences.

Trials and Convictions through NAB Enforcement Agency
The establishment of the National Executive Committee is a major step in the right direction, encouraging representatives from the Ministry of Finance, the Ministry of Foreign Affairs, SBP and NAB to participate and all major stakeholders are protecting Pakistan from money laundering and terrorist financing 4. A centralised database framework has been established of suspicious individuals and transactions in the form of equipped reference points for marking future activities.

NAB law enforcement initiatives require the support of financial organisations, and many banks have established compliance sections with specific anti-money laundering (AML) contact points 5.

 

More recently, another regional body known as FATF came into action for combating money laundering and terrorism in Pakistan.

 

Ongoing Challenges

In June 2017, Pakistan was added to the list of counties who have still not taken sufficient steps to remove threats to the economic sector in terms of corruption and money laundering 3.  Further, Pakistan was in the top ten list compiled by Paris which declared that Pakistan is involved in money laundering which has become the source of terrorism and corruption, supplying money to terrorists.

Reforms Needed

Pakistan should understand how the country’s problems are exacerbated by money laundering and financing risks. The government should implement and enforce stricter measures including empowering agencies to implement actions to assess risk. It should apply resources aimed at ensuring effective risk mitigation. There is a necessity to review the national anti-money laundering and counter-terrorism financing laws and regulations and to designate policies that are responsible

Control Measures – Critical Analysis

Pakistan has introduced multiple reforms and policies in an attempt to eliminate money laundering from the state.

 

In 2007 the Government introduced a legal framework known as the Anti- Money Laundering Ordinance of 2007. Pakistan criminalised money laundering by setting up the Financial Intelligence Unit (FMU) in December 2007. The FMU became operational after the approval by the National Executive Committee in 2008.  The main objective was to eliminate such crimes from the country, yet its implementation is still not successful 4.

In 2010, the Anti-Money Laundering Law of 2010 was introduced to co-ordinate all relevant law enforcers. The primary objective was to implement appropriate legislation to assure proper exploration, conviction and prosecution of money-laundering transgressions 4.The bill combines all the necessary features of Pakistan’s legal structure, which previously worked largely in isolation in order to prevent and control money laundering in the state 3.

The Anti-Money Laundering Law, 2010 and its supportive regulations have laid a solid basis for curbing the country’s money laundering and terrorist financing activities 2. Under the 2010 Law, a senior National  Executive Committee was established, consisting of four ministers, the President of the National Bank of Pakistan and the Chairman of the Pakistan Securities and Exchange Commission, who have full authority to establish an “anti-money laundering act and Terrorist Financing (AML / CTF) strategy” 4. The website of the Financial Monitoring Unit states that there are more than 20 laws, 3 different sets of policies and regulations and 10 various reporting formats and notes with the guidelines to control and to eliminate the crime of money laundering

Financial institutions should retain all compulsory records of domestic and international transactions for at least five years to make them able to quickly comply with the information requirements of the experienced authorities. Such data and records must be sufficient and detailed enough to allow the re-establishment of personal transactions in order to provide evidence of criminal movement where necessary.

 

If an offence is already suspected of having being committed, then prior to trial, Judges of the High Court ought to be empowered with the ability to grant freezing orders on assets albeit with a right of redress to ensure individuals rights are safeguarded. After conviction, trial judges must be granted wide ranging powers to confiscate assets that are found to be from the proceeds of crime.

 

Trials of public officials in the Accountability Courts in cases of public interest are a step in the right direction however a high percentage of judgements from these courts are overturned on appeal to the High Court. It is recommended therefore that Accountability Courts, due to the importance of the cases being tried, ought to consist of a bench of 3; a lay person magistrate (qualified in finance), and two judges, a trial judge of the Accountability Court and a High Court judge. As well as providing more expertise, the panel of 3 will help to minimise the potential for bias or corruption. The right to appeal a judgement of the Accountability Court to the High Court should be maintained.

 

Accountability Court trials are held in public however given the public interest, the trials should also be broadcast to minimise false information provided after the conclusion of a trial when contradictory statements are given to the press from the prosecution, the defendant and the judges.

 

It is also imperative in the interest of justice that the losing party pay the costs.

Conclusion

Money laundering is acting as a barrier to the progress and development of Pakistan by causing the growth and development of financial crises and poverty in Pakistan.

The economy and Pakistan society in general needs to be protected.  Sufficient legislation needs to not only be enacted but also vigorously enforced. Further, more co-ordination between different state bodies needs to take place to tackle this issue particularly where companies are being used to facilitate money laundering on a large scale.

 

Pakistan must continue to take this issue seriously and only then can the problems be minimised to ensure that Pakistan can maintain its growth and sustainability both nationally and internationally.

 

Dr Liaqat Malik, 2019

 

References

  1. Oxford English dictionary definition, 3rd edition, 2005
    2. Chaikin, D. and Sharman, J., 2009. Corruption and money laundering: a symbiotic relationship. Springer.
    3. Zdanowicz, J.S., 2009. Trade-based money laundering and terrorist financing. Review of law & economics, 5(2), pp.855-878.
  2. Amjad, R., Arif, G.M. and Irfan, M., 2012. Preliminary study: Explaining the ten-fold increase in remittances to Pakistan 2001-2012.
  3. Ihsan, I. and Razi, A., 2012. Money laundering-A negative impact on economy. Global Journal of Management And Business Research, 12(17), Naheem, M.A., 2015. Trade based money laundering: towards a working definition for the banking sector. Journal of Money Laundering Control, 18(4), pp.513-524

Further Reading

Amoore, L. and de Goede, M., 2011. Risky geographies: aid and enmity in Pakistan. Environment and Planning D: Society and Space, 29(2), pp.193-202.
Chêne, M., 2008. Hawala remittance system and money laundering. U4 Expert Answer. Anti-Corruption Resource Centre, Norway..
Usman Kemal, M., 2014. Anti-money laundering regulations and its effectiveness. Journal of Money Laundering Control, 17(4), pp.416-427.

 

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