The Killer Financing

By Mehtab Haider-

Without curbing major sources of funding, the menace of terrorism cannot be eliminated from Pakistan

There are certain pre-requisites for launching stern action against terror financing in the country. First of all, there is need strengthening of laws, close liaison among intelligence and law enforcing agencies, developing their expertise to hunt down financing of terrorists in effective manner. To curb white collar crimes there is need of sophisticated workforce knowing how to operate in invisible manner to achieve success and it cannot be done without proper and state of art training.

Although, the law on Anti Money Laundering (AML) was passed by the legislatures in 2010 in Pakistan but it proved futile and toothless so far for effectively tackling terrorist outfits and breaking all channel of funding with full force.

Now Pakistan is making efforts to bring its law in line with international standards set by Financial Action Task Force (FATF) which was established in July 1989 by a Group of Seven (G-7) Summit in Paris, initially to examine and develop measures to combat money laundering.

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 system.

Starting with its own members, the FATF monitors countries’ progress in implementing the FATF Recommendations; reviews money laundering and terrorist financing techniques and counter-measures; and, promotes the adoption and implementation of the FATF Recommendations globally.

Islamabad has also made commitment with FATF as well as the IMF to bring changes in AML in order to bring tax evasion into the category of money laundering.

In its latest report, the IMF staff reiterated the importance of increased efforts to tackle tax evasion through use of the AML regime. The IMF stressed the necessity of enacting amendments to the relevant tax laws and submitting the AML Act (AMLA) to the NA for approval and the government met this structural benchmark at least by tabling this bill before the Parliament. The enactment of the AMLA and its proper implementation will facilitate the detection of proceeds of tax crimes.

The Financial Monitoring Unit (FMU) has prepared draft guidance on the risks of abuse of the investment incentive scheme with an objective to avoid its misuse in the country.

Having frozen over Rs one billion accounts by Pakistani banks under different resolutions passed by United Nations (UN) in the aftermath of 9/11, 2001 but the international community warned time and again to strengthen the anti money laundering law in the country or face consequences in terms of imposition of restrictions on opening up of Letter of Credits (L/Cs) by the different financial institutions all around the world. In case of dishonoring L/Cs of Pakistani banks could have far reaching negative impacts for country’s trade on accounts of imports and exports that could become virtually halt in any such highly unwarranted scenario.

In Pakistan, over 5,700 cases were framed on the basis of Special Transaction Reports (STRs) sent out by the Financial Monitoring Unit (FMU) working under Ministry of Finance for implementing anti-money laundering law during the last five years.

In the Modarba scandal, the FMU sent out STRs to NAB out of which they recovered Rs700 million.

About operational difficulties related to anti-money laundering law in Pakistan being faced by banks, no penalty was imposed so far on Pakistani bank but laxity in existing law resulted in putting certain transactions into the category of extra due diligence (EDD).

A banker said that one transaction was put into the category of suspicious transaction and were asked to look back the whole transactions of last few years, although, nothing proved but it had cost us million of dollars.

Pakistani banks were facing difficulties in opening up L/Cs. The law-enforcement agencies took extreme steps in certain cases creating problems for banks.

Under the proposed amendments to AMLA 2010, the government has suggested bringing different sources of funding into anti-money laundering. The law proposed permission for establishing international cooperation to counter money-laundering for terrorism related activities.

In a bid to strengthen the existing Anti Money Laundering Law 2010, the government has proposed amendments to tighten its noose against those who were financing the terrorist activities inside Pakistan. The law proposed to confiscate the properties of the owners involved in this crime. These amendments would help the government to ensure that the proceeds of crime and property involved in money laundering are detected, investigated and prosecuted effectively in Pakistan.

The law proposed that the properties obtained through money laundering would be confiscated. It also proposed cooperation with other countries in case of receiving request from any other foreign capitals of the world.

In the aftermath of brutal attack at Army Public School (APS)Peshawar, the issue of terrorism financing has come into the limelight as now efforts are underway to choke all sources of funding being used to flame terrorist activities in the country.

During the preparation of National Action Plan to root out terrorism from Pakistan, certain pre-requisites were focused to put in place starting from gathering of intelligence through collaborative efforts among variety of over two dozen intelligence agencies as well as taking measures to curb financing for terrorist organizations and individuals involved in destabilizing the country.

Now after admitting in the Upper House of Parliament by the Interior Ministry about receiving of foreign funding by 23 religious seminaries from Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, there is dire need to investigate and initiate action against those entities which are nurturing any terrorism related activity here in any part of the country.

As many as 12 Madaris in Khyber Pakhtunkhwa province were receiving funding from Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, nine Madaris in Balochistan and two in Sindh were also receiving foreign funding from foreign countries, including Iran.

According to experts who worked on preparing National Action Plan, they said that the realization in Pakistan that terrorism has become an imminent and existential threat brought instinctively the religious seminaries and Madrassahs in sharp focus. The Lal Mosque clerics added people’s outrage that civil society protested demanding blasting the foundation that housed terrorism to nib Madrassah and its ideology in the bud forever

The challenge before government is to bridge gap between formal education and Deeni education and dispel negative impression of Madrassahs with regard to extremism, terrorism, sectarianism, militancy.

The process of reforms and restructuring should bring Deeni education in national mainstream. This would need an inclusive and integrated approach and consultations. There are five points formula if agreed by Government and ITMP can bring paradigm shift towards reforms and restructuring of Madrassahs in Pakistan.

One, Madrassahs should agree to register with the Government, submit their audited accounts before the government on annual basis, the government should recognize the five boards of (Ittehad Tanzeem Madaris Pakistan (ITMP) and guarantees non interference in the design of their religious curricula and in return Madrassahs should agree to include syllabus of formal education as prescribed by the Government, three  creation of a Regulatory Board by the government having representation of ITMP, fourth Madrassahs agree restrictions on to teach or publish any literature that promotes militancy or spreads sectarianism or religious hatred in the country.

The writer is a senior Islamabad based economic correspondent attached with The News