“The first step towards a science of law is the making of distinction between what comes within and what does not come within the legal meaning of a rule.” —Roscoe Pound

If Pound’s axiomatic first step is taken in understanding laws related to Financial Action Task Force (FATF), it will transpire that many laws have virtually been rewritten; these laws have affected civil, business, corporate, tax, criminal and regulatory regimes in a big manner. The characteristic feature of FATF-related legislation is that it has linked civil and regulatory laws with criminal laws of the country. The instant iteration will briefly present conceptual side of these laws in a thematic manner:

  1. International Law

Usually, the FATF-related legislation is seen as a foreign influence affecting legal system and public policy in Pakistan. While this may be partially true, the fact of the matter is that Pakistan has long agreed to international legal obligations that are being enforced by it now. The foremost among them are three international treaties, namely: (1) the UN Convention against the Illegal Traffic in Narcotic Drugs and Psychotropic Substances, 1988 (Vienna Convention), (2) the International Convention for the Suppression of the Terrorism Financing, 1999 (that came into force in 2002), and (3) the UN Convention Against Transnational Organized Crime, 2001 (Palermo Convention). These treaties are supplemented by two main UN Security Council Resolutions, i.e. 1267 of 1999 and 1373 of 2001. The two UNSC resolutions reaffirmed the treaty obligations and were aimed at strengthening the system of enforcement of international obligations by establishing sanctions committees as these were passed under Chapter VII of the UN Charter. Later, through UNSC Resolution 1617 of 2005, the FATF Recommendations were applied to UN Counter-terrorism efforts. A brief survey of international law (soft and hard) has been carried out to show that ex post facto treatment being meted out to international law by policymakers needs rethink, and all the international legal obligations must be carefully examined before any concurrence is recorded at diplomatic level. Finally, it must be noted that owing to the importance of international law, the United Nations Security Council Act, 1948, was amended in July 2020 to provide enabling legal powers for authorities to comply with the UNSC resolutions.1200px-Financial_Action_Task_Force_on_Money_Laundering_logo.svg

  1. Terrorism Law

Since 1997, the anti-terrorism law of Pakistan has had legal provisions to deal with counter-terrorism financing. On the detection side, it criminalized four acts as part of counter-terrorism financing: fundraising for terrorists (11-H), use and possession of terrorism-related funds (11-I), arranging funds for terrorists (11-J) and money laundering (11-K) were punishable under one penal section (11-N). On the preventive side, the proscription regime controlled by executive authorities formed the basis of state action against terrorist organizations and persons. The recent set of amendments to the Anti-Terrorism Act, 1997, has added the following:

  1. Anti-Terrorism (Amendment) Act, 2020: A new offence 11-OOO added to the Act. This new offence criminalizes violation of orders passed by federal government to comply with the UNSC resolutions. The offence has been criminalized for both natural and legal persons with varying punishments.
  2. Anti-Terrorism (Second Amendment) Act, 2020: It has expanded the definition of offence related to arranging funds for terrorists (11-J) and has enhanced the punishments for counter-terrorism-related offences under section 11-N to make them dissuasive and deterring.
  3. Anti-Terrorism (Third Amendment) Act, 2020: The amendment has been introduced to make admissible four new techniques of investigation with the permission of court. This is aimed at increasing the evidentiary value of new techniques. These four new techniques are: (i) undercover operations; (ii) intercepting communications; (iii) accessing computer system; and (iv) controlled delivery (i.e. entrapment). The use of these four techniques will surely add teeth to the financial intelligence-gathering in the context of international cooperation and exchange of information.
  4. Property and Business Law

Civil law, especially with regard to property and ownership rights, has also been amended through the recent FATF-related legislation. The concept of ultimate beneficial ownership has been introduced to Pakistan’s business law by amending the Companies Act, 2017, the Limited Liability Partnership Act, 2017, and the Cooperative Societies Act, 1925.

  1. Money Laundering Law

The main legislation to deal with counter-terrorism financing is the Money Laundering Act, 2010. The law is very important as it addresses administrative, regulatory, penal, procedural and international cooperation aspects. Two sets of amendments were introduced to the law in 2020. Based on the latest amendments, the following are its characteristic features:financing_terrorism_feature2

  1. At policy level, it envisages a National Executive Committee that sets the policy options and is headed by Minister for Finance;
  2. For implementation, it provides for a General Committee to be headed by Secretary Finance;
  3. The law provides for preventive legal framework that works under the Financial Monitoring Unit (FMU) that is housed at State Bank of Pakistan. Besides analyzing Suspicious Transaction Reports (STRs) and Currency Transaction Reports (CTRs), it has the power to disseminate the material to the concerned investigation or prosecution agency, as the case may be;
  4. The law provides for treaty offence of money laundering in conformity with the Vienna and Palermo Conventions. It defined the offence of money laundering and also linked it to predicate offences that become source for creation of wealth to be laundered;
  5. The law has a robust enforcement regime that goes after the property and authorizes the investigator to attach, seize and retain the property with a court order and after providing opportunity of hearing to the person suspected. After finalization by court, the property can be forfeited by the federal government;
  6. The law provides for a self-contained regime for Regulators and Self-Regulated Bodies (SRBs). Through the latest amendments introduced in September 2020, the law requires these Regulators and SRBs to conduct due diligence of their domains depending upon their level of vulnerabilities;
  7. The law requires elaborate compliance and management arrangements to be made by all especially the Designated Non-Financial Business and Professions (DNFBPs); and 
  8. For international cooperation and exchange of information, the law has self-contained detailed legal provisions, which are essentially civil in nature. In case of criminal international cooperation, the Mutual Legal Assistance (Criminal Matters) Act, 2020 may be used.

Concluding Remarks

It may be realized that the world has moved from detection of white-collar crime to policing it. The policing of white-collar crimes and economic activities require high level of skill and expertise, which must be introduced through targeted training of public functionaries.

The author is an independent researcher and has done his BCL from the University of Oxford. Email: kamranadilpsp@gmail.com

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