Financial Crime World

Pakistan’s Road to Compliance: A Success Story

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In October 2022, Pakistan successfully completed its Action Plan with the Financial Action Task Force (FATF) and was removed from the Grey List. This achievement is a testament to the country’s commitment to combating money laundering and terrorist financing.

A New Era for Regulatory Framework

To achieve this milestone, Pakistan introduced numerous laws and regulations, including amendments to existing legislation such as:

  • The Anti-Money Laundering Act of 2010
  • The Anti-Terrorism Act
  • The Foreign Exchange Regulations Act

The country also designated several authorities and organizations as Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) regulators, including the Institute of Chartered Accountants of Pakistan (ICAP).

ICAP Takes the Lead

As an AML/CFT regulator, ICAP played a crucial role in establishing a comprehensive risk-based supervision framework. The institute:

  • Developed an off-site monitoring program to assess ML/TF risks and ensure compliance
  • Implemented an automated risk matrix program to identify high-risk entities
  • Conducted robust on-site supervision programs to ensure compliance

Structural Changes and Governance

ICAP made significant structural changes to govern its new regulatory responsibilities, including:

  • Establishing an AML Supervision Department
  • Creating an independent Board (AML Supervisory Board)
  • Setting up an Internal Executive Committee to assist the AML Supervisory Board in enforcing policies

Risk-Based Approach

ICAP implements a risk-based approach to supervision, focusing on reporting firms that present higher ML/TF risks. This approach ensures:

  • The most effective allocation of supervisory resources
  • Targeting entities with greater risk

Member Education and Global Engagement

ICAP has been actively educating its members through:

  • Awareness sessions
  • Webinars
  • Online resources

The institute is also leveraging its experience to support other Professional Accountancy Organizations worldwide in engaging with AML/CFT reform.

Conclusion

Pakistan’s success story serves as a model for countries struggling with AML/CFT compliance. By introducing new laws, designating authorities as regulators, and implementing a risk-based approach, Pakistan has demonstrated its commitment to combating money laundering and terrorist financing.

As the country continues to engage globally, ICAP remains at the forefront of promoting AML/CFT best practices and sharing its experiences with other professional accountancy organizations around the world.

Image Caption:

The Institute of Chartered Accountants of Pakistan (ICAP) plays a crucial role in combating money laundering and terrorist financing as an Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) regulator.