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 significant manner. The characteristic feature of FATF-related legislation is that it has linked civil and regulatory laws with criminal laws of the country.
This article will briefly present the conceptual side of these laws and analyze them in a thematic manner.
1. INTERNATIONAL LAW
Usually, FATF-related legislation is viewed as undue foreign influence on Pakistan’s legal and public policy frameworks; ‘recommendations’ issued by the international governance body are imposed on the domestic framework through legislation. While this may be partially true, the fact of the matter is that Pakistan has agreed to the international legal obligations that FATF is now enforcing on the country. These obligations can be traced back to three international treaties, to which Pakistan is a signatory:
(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 (came in force in 2002), and
(3) the UN Convention Against Transnational Organized Crime, 2001 (Palermo Convention).
These three treaties are supplemented by two main UN Security Council Resolutions 1267 of 1999 and 1373 of 2001. These two UNSC Resolutions reaffirmed treaty obligations, aiming to strengthen the system of enforcement of international obligations by establishing sanctions committees as these Resolutions 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 policy makers needs a rethink, and that all the international legal obligations must be carefully examined before any concurrence is recorded at diplomatic level.
Owing to the importance of international law and enhancing adherence to the UNSC Resolutions, certain key legislative amendments have been passed recently in Pakistan. The the United Nations Security Council Act, 1948 was amended to enable legal powers for authorities to comply with the UNSC Resolutions to curb terrorism financing and money laundering.
2. TERRORISM LAW
Pakistan’s anti-terrorism law contains legal provisions pertaining to countering financing of terrorism in its key legislation, the Anti-Terrorism Act (ATA), 1997. In terms of detection, the ATA criminalizes four actions as part of countering terrorism financing: fund raising for terrorists (11-H), use and possession of terrorism related funds (11-I), arranging funds for terrorists (11-J) and money laundering (11-K), all of which are punishable under one encompassing 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 have added the following:
- Anti-Terrorism (Amendment) Act, 2020: A new offence was added to the Act as section 11-OOO. This new section 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.
- Anti-Terrorism (Second Amendment) Act, 2020: This amendment adds to section 11-EE(2), prohibiting provision of loans or financial assistance to those associated with banned organizations and restricting all banks and financial institutions from issuing credit cards to individuals on the proscribed persons list. It also expanded the definition of offence related to arranging funds for terrorists (11-J) and has enhanced the punishments of counter-terrorism related offences under section 11-N to make them dissuasive and deterring.
- 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 arm the authorities with the powers to effectively gather the financial intelligence gathering in the context of international cooperation and exchange information pertaining to terrorism and terrorism financing offences.
3. PROPERTY AND BUSINESS LAW
Civil law especially with regards to property and ownership rights has also been amended through the recent FATF related legislations. 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.
Additionally, the introduction of the Islamabad Capital Territory Waqf Procedure Act, 2020 and the Islamabad Capital Terrorist Trust Act, 2020 further bolstered the regulatory framework pertaining to property management to ensure adherence to FATF Recommendations.
4. ANTI-MONEY LAUNDERING LAW
The main legislation to deal with counter-terrorism financing is Anti-Money Laundering Act, 2010. The seminal legislation addresses administrative, regulatory, penal, procedural and aspects of international cooperation. Two sets of amendments were introduced in the law in 2020. Based on the latest amendments, the following are its characteristic features:
- At policy level, it envisages a National Executive Committee that sets the policy options and is headed by Minister for Finance;
- For implementation, it provides for a General Committee to be headed by Secretary Finance;
- 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 to the power to disseminate the material to the concerned investigation or prosecution agency, as the case may be;
- The law provides for the offence of money laundering in conformity with the definitions of the Vienna and Palermo Conventions. It further links the offence of money laundering to the predicate offences, since the latter is the source for creation of wealth to be laundered;
- The law has a robust enforcement regime that oversees laundered property. It authorizes the investigator to attach, seize and retain the property with a court order, and empowers the investigating officer to hold the accused for 180 days in remand. After finalization by the court, the property can be forfeited by the Federal Government;
- 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;
- The law requires elaborate compliance and management arrangements to be made by all especially the Designated Non-Financial Business and Professions (DNFBPs);
- 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.
It may be realized that world has moved from detection of white collar crime to policing it. The policing of white collar crime and economic activities require high level of skill and expertise, which must be introduced through targeted trainings of public functionaries. The enhancement of existing legal frameworks, complete with more robust detection and preventative elements qualitatively add to Pakistan’s countering financing of terrorism regimes.