Pakistan's national financial authority has adopted new regulations to fight money laundering and terror financing and to comply with Financial Action Task Force's (FATF) guidelines, a global financial watchdog that recently placed Pakistan on its gray list for its inability to choke terror financing.
Securities and Exchange Commission of Pakistan, or SECP's "Anti-Money Laundering and Countering Financing of Terrorism Regulations, 2018" is a framework designed to comply with FATF's recommendations that are critical for Pakistan to remain a member of the Asia Pacific Group, an FATF body that overlooks Asian countries.
SECP's order will void earlier notifications that demanded a separate requirement for anti-money laundering (AML) and countering financial of terrorism (CFT) for financial institutions.
The directive issued by the national security entity said the newly adopted law will help to identify criminals and militant elements that hide behind the "complex ownership structure of companies or other similar forms."
Terror financing remains a big challenge in Pakistan, where militant groups allegedly raise money under the guise of religion and welfare for the poor.
Foreign funding, drug trafficking, extortion from business and kidnapping for ransoms are other means of income for terrorists in Pakistan. They also largely use Hawala system, an alternative or parallel banking system to launder money.
The international community has repeatedly expressed concerns about Pakistan's noncompliance to the international guidelines to choke militants' financial sources in the country.
Pakistan denies the allegations and maintains it has destroyed terror elements indiscriminately and has curbed the financial assets of militant elements.
Last year, Washington suspended $2 billion worth of aid to Pakistan, accusing the country of harboring terrorists that launch attacks on NATO and Afghan forces in neighboring Afghanistan.
FATF's gray list
Earlier this year, United States along with France, Britain and Germany reached out to FATF and introduced a motion alleging Pakistan had failed to comply with the global watchdog's guidelines on terror financing and anti-money laundering regulations.
In February, during a meeting of FATF member countries in Paris, it was decided to place Pakistan on FATF's grey list to pressure Pakistan to take more concrete steps against terror financing.
Lisa Curtis, a United States National Security Council official, visited Islamabad after the FATF decision and said: "There has been a longstanding concern about the ongoing deficiencies in Pakistan's implementation of its anti-money laundering/counterterrorism finance regime."
Pakistan also previously remained on FATF's terror watch list from 2012 to 2015.
Terror law amendment
In February, Pakistan's President Mamnoon Hussain approved amendments to country's anti-terrorism law that authorized the government to automatically blacklist groups declared terrorists under U.N. Security Council resolutions.
Jamaat-ud-Dawa (JuD) and the Falah-e-Insaniat Foundation (FIF)'s operations were seized. Both of these charities are linked to the Islamist cleric Hafiz Saeed who is believed to be the mastermind of the 2008 attack in Mumbai that killed more than 160 people, including six Americans. He was added to the U.N. Security Council Resolution 1267 sanctions list in December 2008.
The U.S. designated Saeed a global terrorist in 2012 and offered a bounty of $10 million for information that would lead to his arrest.
Pakistan has been severely criticized for its inability to crack crackdown on Saeed and his JuD and FIF organizations. Despite being placed on U.S. and U.N. terror lists, the organizations had until recently operated freely. Over time, the groups have managed to gain influence throughout the country.
In January, the Securities and Exchange Commission of Pakistan (SECP) issued a directive banning individuals and groups placed on terror watch lists by Pakistan and the U.N. Security Council from collecting funds. The directive also banned those groups from arranging any political, social, welfare or religious events in the country. The directive included Saeed's JuD and FiF.