Our national priorities

Huzaima Bukhari, Dr. Ikramul Haq & Abdul Rauf Shakoori

The claws of corruption have engulfed us, and its force is getting stronger with each passing day. Although the incumbent government came into power with the slogan of eliminating corruption, it has failed to bring about any positive change as Pakistan has lost seven points since 2018 on corruption perception index.

Pakistan has been identified as part of those “jurisdictions subject to increased monitoring” by Financial Action Task Force (FATF). Our stakeholders should have formulated policies and procedures to counter corruption as it is said to be one of the prime sources of money laundering [we also elaborated how to counter corrupt practices in last week’s column,?Countering corrupt practices, Business Recorder, July 30, 2021]. Our law and order situation is deteriorating with the judicial system ranking among the bottom performing countries by the World Justice Project Report 2021. The efficacy of our quality of Anti-Money Laundering/Combating the Financing of Terrorism (AML-CFT) framework is rated as low vis-à-vis eleven immediate outcomes. Efforts related to bribery and corruption appear to be selective and limited to arm twisting of political opponents. No transparency is being observed in financial dealings and it appears that our law enforcement agencies and judiciary have extended exemption to the Prime Minster and his cabinet from accountability. It is evident from the fact that despite various scandals relating to corruption and violations of laws, no actions are being taken against the accused ministers. The opposition leaders and independent observers openly say that “the superior courts are facilitating them by issuing stay orders”. ?

It is pertinent to mention that Pakistan and the United States recently issued new laws to deal with Money Laundering and Terrorist Financing. Pakistan’s amended Money Laundering Act, 2010 through the Anti-Money Laundering (Second Amendment) Act, 2020 whereas the United States passed Anti-Money Laundering Act of 2020 [US AML Act 2020] enacted by the US Congress as part of the National Defense Authorization Act for Fiscal Year 2021. It places a variety of new anti-money laundering (AML) obligations on banks and other financial institutions. Many of these are of major significance for such institutions. Now if we compare both, it shows that US AML Act, 2020 addresses concerns related to national security, formalization of the risk-based approach, expanding the duties, powers, and functions of Financial Crimes Enforcement Network (FinCEN), supporting, and supervising regulatory agencies to achieve the extended purpose of banking secrecy, and the most significant additions which address the issue related to beneficial ownership reporting regime.

The USA AML Act 2020 discusses and lists as to what would be the national priorities to save their financial system from the illicit flow of funds. These national priorities include corruption, cybercrimes, including relevant cyber-security and virtual currency consideration, foreign and domestic terrorist financing, fraud, transnational criminal organization activity, human trafficking, human smuggling, and proliferation financing. Whereas, in comparison, if we critically analyse the changes introduced by Pakistan to the existing AML Act 2010, it appears that the stakeholders in Pakistan are not interested to introduce any solid changes to counter financial crimes in Pakistan.

?The most disturbing aspect is that the overall AML-CFT framework revolves around the National Executive Committee on ML that is governed by the ministers. The Chairman Committee and some of the ministers are facing corruption charges as well as other crime-related allegations. The new amended law, instead of forming an independent authority having powers to deal with all types of financial crimes, has kept the control and power with them so that they can operate it as per their aspirations. Moreover, the new law does not specify any priorities except listing ambiguous procedures to deal with AML–CFT matters. There is neither any authentic procedure available regarding filing suspicious transaction reports (STR), nor does it mention who will identify threat patterns and trend information to educate the STR filing entities so that they can contribute towards countering the illicit flow of funds.

The question is what exactly is Pakistan’s planning to monitor and counter illicit flow of funds? We have no independent body which can deal with financial crimes and actively pursue matters related to foreign jurisdictions. Though we are trying to handle the issue through Financial Monitoring Unit (FMU), however, independence of this institution is allegedly questionable. Moreover, international institutions, including the US State Department, have already questioned in its 2019 report our ability to counter terrorist financing-related matters.

On the other hand, USA AML Act 2020 empowers the FinCEN by establishing special hiring authority and introduces new roles for local and international jurisdictions. The FinCEN foreign intelligence unit liaisons will be stationed at US Embassies or foreign government facilities to deal with AML-CFT related issues under National Defense Authorization Act for Fiscal Year 2021. Moreover, the USA AML Act 2020 focuses on the creation of Innovation and Technology committee and FinCEN in this regard is launching Innovation Hours Programme where they are inviting all the stakeholders including financial institutions, technology providers, venture capitalists, and other firms engaged in financial services to offer them an opportunity to discuss and showcase their innovative products, services and approaches designed to enhance AML and CFT efforts to provide new financial services to consumers and businesses.

On the contrary, Pakistan is still relying on orthodox approaches to address concerns of the international community. Recently, in June 2021, FATF handed over the new six-point action plan and demanded from Pakistan to investigate and prosecute targeted senior leaders and commanders of UN-designated terrorist groups. ?

In reply to this pledge, we were supposed to take strict actions against the persons involved in supporting terrorist activities, however, our ministers since the last meeting of FATF are trying to project the Taliban good image. Our Foreign Minister is impressed by their wisdom and considers them the only solution to stop Islamic Stater (IS), despite their brutality and inhuman behavior, whereas our Interior Minister is acting as their spokesperson, telling the world that their families are residing in outskirts of the Islamabad Capital Territory (ICT) and assuring the world that they have changed. It appears that we are not ready to accept the new trends. Our priorities are not aligned with our national interests. Our fast deteriorating law and order situation, compromised judicial system, and discredited national watchdogs have lost the trust within and outside the country.

Nobody believes in their investigation due to their political aspirations, therefore, seeking information from foreign jurisdictions has become a challenge for us. Whereas the USA through the USA AML Act 2020 extended powers to the Department of Justice (DOJ) and the Department of Treasury (Treasury) to subpoena foreign banks which are maintaining correspondent accounts in the US. Both departments, the DOJ and Treasury, can issue the subpoena for the record relating to any account held at the bank, including records maintained outside of the United States that do not relate to the US correspondent account. These extended powers are not only for AML-CFT related matters, but the information can be sought for any criminal investigation or civil forfeiture. ?

At a time when some international powers are already doubtful of our approach, this confused and passive approach towards menaces of ML/TF will serve no purpose and will undermine national interests at the global level. Foreign pressure, mounting foreign debt, and inflation are already adversely impacting our economy and at this time, we cannot afford any new international challenge. It is, therefore, imperative for the coalition government of Pakistan Tehreek-i-Insaf and all state functionaries to make appraisal of their words and actions. There must be cohesion among our legal framework, our actions, and our dealings if we want to be taken seriously in our efforts to meet ML/CFT challenges by international community and global watchdogs.

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Ms. Huzaima Bukhari, MA, LLB, Advocate High Court, Visiting Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), is author of numerous books and articles on Pakistani tax laws. She is editor of Taxation and partner of Huzaima & Ikram and Huzaima Ikram & Ijaz, leading law firms of Pakistan. From 1984 to 2003, she was associated with Civil Services of Pakistan. Since 1989, she has been teaching tax laws at various institutions including government-run training institutes in Lahore. She specialises in the areas of international tax laws, corporate and commercial laws. She is review editor for many publications of Amsterdam-based International Bureau of Fiscal Documentation (IBFD) and contributes regularly to their journals.

She has coauthored with Dr. Ikramul Haq many books that include ?Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes, 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).

?The recent publication, coauthored with Abdul Rauf Shakoori and Dr. Ikramul Haq, is Pakistan Tackling FATF: Challenges & Solutions

available at:?https://www.amazon.com/dp/B08RXH8W46

?She regularly writes columns/articles/papers for Pakistani newspapers and international journals. She has contributed over 1500 articles and research papers on issues of public finance, taxation, economy and on various social issues in various journals, magazines and newspapers at home and abroad.

Twitter:?@Huzaimabukhari

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Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media, IT, intellectual property, arbitration and international tax laws. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation.?He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).

He has coauthored 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).

The recent publication, coauthored with Abdul Rauf Shakoori and Huzaima Bukhari is Pakistan Tackling FATF: Challenges & Solutions

available at:?https://www.amazon.com/dp/B08RXH8W46

He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax.

He regularly writes columns/article/papers 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.

Twitter: DrIkramulHaq

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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, 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 have 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 insure 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 grey 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, Countering corrupt practices .

?The recent book, coauthored with Huzaima Bukhari & Dr. Ikramul Haq is Pakistan Tackling FATF: Challenges & Solutions

available at:?https://www.amazon.com/dp/B08RXH8W46

?Twitter: Adbul Rauf Shakoori

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