The United Kingdom has added Pakistan to a list of 21 countries it deems to be high-risk due to deficiencies in anti-money laundering (AML) and counter-terrorism financing (CTF) controls.
The list had previously been determined by the European Union, but following the end of the Brexit transition period, the UK has produced its own list initially based on countries on the Financial Action Task Force’s ‘grey list’ or ‘black list’ (see full list below).
The change, which has come into effect, means businesses regulated under the UK’s AML regulations are required to carry out enhanced due diligence when entering into a business relationship with a person in Pakistan or in relation to “any relevant transaction where either of the parties to the transaction is established” in the country. The UK government says however the impact “willl be limited as this forms part of a wider enhanced due diligence framework already required of these businesses.”
In an explanatory note to the updated legislation, the United Kingdom government said: “The principal policy objective behind this legislation is for the department to be able independently to update the list of high-risk third countries in respect of which the regulated sector needs to apply enhanced due diligence in timely manner in order to continue to be in line with international standards on combatting money laundering.”
Pakistan ministers are unhappy about the move. Foreign Office spokesperson Zahid Hafeez Chaudhri said he hoped the “UK would review its regulations in light of facts on the ground and avoid politically motivated and misplaced measures.”
Since 2018, Pakistan has been on FATF’s ‘grey list’ of countries deemed to have strategic AML/CTF deficiencies.
FATF said the country has made “significant progress” and has now met 24 of 27 agreed actions. It has urged the country to complete the three remaining actions, which all relate to CTF, by June of this year. Chaudhri said Pakistan is “close” to fully implementing its improvement plan.
The three remaining actions are:
- Demonstrate that terror financing investigations and prosecutions target persons and entities acting on behalf or at the direction of the designated persons or entities.
- Demonstrate that terror financing prosecutions result in effective, proportionate and dissuasive sanctions.
- Demonstrate effective implementation of targeted financial sanctions against all 1267 and 1373 designated terrorists, specifically those acting for or on their behalf.
AT-A-GLANCE: Countries on the UK’s list of third countries deemed high-risk for AML/CTF
Democratic People’s Republic of Korea
Source: The Money Laundering and Terrorist Financing (Amendment) (High-Risk Countries) Regulations 2021