On 4th March, 2022, the sixth Plenary of the Financial Action Task Force (FATF) was held in Paris, France. In this plenary, the FATF found Pakistan compliant in 32 out of 34 action items. This was an exceptional performance by Pakistan, one that was deserving of exiting the FATF’s list of jurisdictions under ‘increased monitoring’ (grey list).
In line with international standards, Pakistan continues to strengthen its anti-money laundering and counter-terrorism financing regime. The FATF’s grey-listing has instilled a greater sense within the authorities to detect, investigate and prosecute the crime of money laundering. Similarly, courts have also been proactive in progressively adjudicating ML offences, particularly in straightening out the technicalities that could hinder the process of pursuing an ML case in court. This article discusses the key lessons from the seminal Muhammad Rafique case, as it particularly strengthens the concept of establishing predicate offences in ML cases and addresses key technical questions.
While reviewing ‘jurisdictions under increased monitoring’, the FATF made three observations about Pakistan:
- That it has ‘completed 26 of the 27 action items in its 2018 action plan’;
- ‘Since June 2021, Pakistan has taken swift steps towards improving its AML/CFT regime and completed 6 of the 7 action items ahead of any relevant deadlines expiring, including by demonstrating that it is enhancing the impact of sanctions by nominating individuals and entities for UN designation and restraining and confiscating proceeds of crime in line with Pakistan’s risk profile.
- Pakistan should continue to work to address the one remaining item in its 2021 action plan by demonstrating a positive and sustained trend of pursuing complex ML investigations and prosecutions.
Proactive Adjudication by local courts in ML cases
Investigators and prosecutors work closely to initiate legal action against criminal networks involved in money laundering. As mentioned above, courts have additionally began progressively interpreting and examining the Anti-Money Laundering Act, 2010 (AML Act) as a specialized law – tenets of which must be mainstreamed with the legal and criminal justice system of the country.
This was made clear in a recent judgement by the Islamabad High Court in a seminal case titled as Muhammad Rafique vs. Director General, Federal Investigation Agency, Islamabad (Muhammad Rafique case). This case is critical for practitioners and academics alike, as it lays out the principles that would govern the investigation, prosecution and adjudication of AML cases. Likewise, it also examines the co-existence of the AML regime along with the general criminal law and criminal procedure.
Lessons from the Muhammad Rafique Case
- Reporting Money Laundering in a Separate FIR
Money laundering falls within the ambit of white collar crime. It is conceptually nuanced, and requires to be linked with a predicate offence i.e. an offence that generates crime proceeds. This technicality has been part of architecture of criminalization of money laundering at international level where the United Nations Convention against Transnational Organized Crime (UNTOC) defines the concept of a ‘predicate offence’.
Linking the offence of money laundering to the offence where illicit money is generated, is a technical matter that often harms investigations and prosecutions. There are inconsistencies based on prior judgments that exacerbate the setting of a standard based on establishing predicate offences in ML cases. In Pakistan’s criminal justice system, section 154 Code of Criminal Procedure, 1898 (concerning reporting of crimes) requires that only one criminal report be generated for an offence. This requirement is guarded by courts, with the latest authoritative judgement of the Supreme Court (Sughran Bibi case) as an example.
In the Sughran Bibi case, multiple criminal cases emanating out of one act/transaction were disapproved. This renders establishing an ML case by linking it with predicate offence inconsistent with the parameters set by Sughran Bibi Case. In the Muhammad Rafique case, the IHC examined this apparent inconsistency, and held that Sughran Bibi Case was based on the ‘concept of same transaction’, which was not applicable to money laundering cases due their ‘specialized nature’. It specifically stated that ‘second’ criminal case (First Information Report) must be registered in money laundering cases.
- Overriding Effect
Primacy and precedence of the AML Act was fortified in the Muhammad Rafique case. The court here stated that that the AML Act’s non-obstante clause had overriding effect on other legislations including general criminal law, the Control of Narcotics Control Act, 1997, the Anti-Terrorism Act, 1997 and the National Accountability Act, 1999.
- Onus of Proof
Distinguishing AML Act from the general criminal law (the Pakistan Penal Code, 1860), it was declared that the burden of proof in AML regime was on the accused whereas in the general criminal law, it was on the prosecution.
- Separate Nature of Money Laundering Offences
The Muhammad Rafique case emphasized the separate nature of the offence of money laundering throughout the judgment. It noted that the legislative intent should be kept in mind while dealing with money laundering cases. It specifically stated that:
- Proceedings can be initiated against an accused of money laundering case irrespective of earlier criminal legal proceedings against him;
- Accused of the money laundering cases be tried separately;
- Acquittal in a predicate offence will not extend any benefit to an accused of money laundering case.
The Muhammad Rafique Case is by no means exhaustive and is likely to be further refined and modified in further adjudication by courts. It, however, symbolizes that commitment, will and interest shown by the components of the criminal justice system to implement the law and to cleanse the financial system of Pakistan. It is hoped that these commitments will be appreciated by the FATF and its affiliate bodies that claim to adhere to rule-based international legal order.
 Muhammad Rafique versus the Director General, Federal Investigation Agency (Writ Petition No. 1184/2011 of the Islamabad High Court). Available at: https://mis.ihc.gov.pk/frmRdJgmnt?cseNo=Writ%20Petition-1184-2021%20%7C%20Citation%20Awaited&cseTle=Muhammad%20Rafique%20VS%20DG%20FIA,%20etc&jgs=Honourable%20Mr.%20Justice%20Mohsin%20Akhtar%20Kayani&jgmnt=/attachments/judgements/128590/1/WP_1184_of_2021_and_WP_1778_of_2021_M_Rafique_v_FG_FIA_637794028984843841.pdf
 Defined in article 2(h) of the United Nations Convention on the Transnational Crime, 2001
 PLD 2018 SC 595
 Para 24(iv) of the Judgement in Muhammad Rafique Case.
 Section 39 of the Anti-Money Laundering Act, 2010
 Section 39 of the Anti-Money Laundering Act, 2010