FATF Laws: Sword Hanging Over the Heads of Legal Professionals?

The Financial Action Task Force (FATF), the international watchdog against money laundering and financing of terrorism, first put Pakistan on a list of “jurisdictions with strategic deficiencies”, also known as the grey list, in 2008. Pakistan remained part of the same list during 2012-2015.

In 2018, Pakistan was again included in the grey list on the basis of “structural deficiencies” in anti-money laundering (AML) and combating the financing of terrorism (CFT). Since then, fear had arisen that Pakistan might not only remain in the grey-list but actually be included in FATF’s blacklist since FATF had demanded that Pakistan needed to work on 27 points in order to get out of that list.

A few months ago, Pakistan reported back to the FATF regarding those 27 points. FATF declared that Pakistan had been fully compliant with 14 out of 27 points, but in order to get out of the grey list, Pakistan needed to comply with the remaining 13 points which included prosecution and conviction of banned outfits and proscribed persons (a list had been provided to the Government of Pakistan).

To comply with FATF recommendations and avoid being blacklisted, Pakistan’s Parliament passed 3 FATF-related Bills in its joint session:

  1. The Anti-Money Laundering (Second Amendment) Act, 2020 (AMLA 2020);
  2. The Anti-Terrorism (Third Amendment) Bill, 2020 (ATA 2020); and
  3. The United Nations (Security Council) (Amendment) Bill, 2020 (UNSC 2020).

These Bills raised many concerns regarding:

  • their passage,
  • the consensus of stakeholders, and
  • many of the provisions essentially being against fundamental rights and liberties.

These have already been discussed and debated on electronic and print media. Our concern is specially tilted towards how they can affect legal professionals. Many aspects of these Bills can raise suspicion with regard to their misuse.

Firstly, the investigation and prosecution role has been extended to the Federal Board of Revenue (FBR) and provincial counter-terrorism departments apart from the National Accountability Bureau (NAB), the Federal Investigation Agency (FIA) and the Anti-Narcotics Force (ANF). Moreover, the federal government reserves the power to include any other law enforcement agency or empower any officer of BPS grade 18 and above to act as an investigating officer. This raises serious concerns with regard to political engineering and misuse of power, especially since no proceedings could lie against such persons acting on the basis of good faith.

Similarly, provisions have been added empowering the government to notify the National Executive Committee and even delegate its powers to others. Even agencies and institutions have been empowered to prescribe powers and procedures under the law by way of regulations. A more problematic and undemocratic move is that the Financial Monitoring Unit (FMU) has been allowed to cooperate with financial intelligence units in other counties without due administrative process. This has made the situation somewhat fishy and unpredictable. Such blanket powers and uncontrolled activities have the prospect of being abused in many ways.

On the other hand, money laundering has been made a ‘cognizable’ and non-bailable offence. Now, an investigating officer can arrest anyone he or she has “reason to believe” to be guilty of the offence of money-laundering, without the permission of the court. It is to be noted that the word ‘reason’ is too extensive and such a generic term can be satisfied very easily. There is no requirement of ‘sufficient’ or at least a good reason.

Another serious concern is about the detention of an arrested person. Previously, the investigating officer had a duty to take the arrested person before a judicial magistrate within 24 hours of arrest. This section has now been omitted. Does this mean that an arrested person can be withheld or detained for an unknown period of time? It is a difficult legal question to answer, especially since the Criminal Procedure Code also stays relevant, as provided by the same Bill. Only the courts are better equipped to answer this question. Nevertheless, it is sufficient to raise concerns.

An argument about contradicting provisions in the amended version of the Anti-Money Laundering Act can also be made. On one hand, a suspected money launderer or abettor can be arrested without the permission of the court since money laundering is a cognizable offence. On the other hand, in another provision, arrest and detention by an investigating officer, without prior permission of the court, has been declared an offence. Similarly, in one provision it appears that suspected property can be searched or seized by an investigating officer on his or her own. On the other hand, such an act has been declared an offence.

The Anti-Money Laundering Act has also been deemed draconian with regard to violation of privacy, seizure of property, allocation of fine and punishment for the offence of money laundering. For the purposes of investigation, an investigating officer can intercept communications and/or access computers for 60 days with the prior permission of the court. Property suspected to be involved in money laundering can be seized by the National Executive Committee. Rigorous imprisonment for up to 10 years has been provided for in mandatory terms. Fine has been raised from 1 million for individuals and 5 million for companies to 25 million for individuals and 100 million for companies.

It should be noted that a law firm or any other association of individuals would be considered a company for the purposes of this Act. This should not be a surprise. But the provisions especially intended to catch/curb legal professionals are yet to come.

Lawyers, notaries, accountants and other professionals can be caught for a number of transactions which they carry out for their clients concerning the following activities:

  • buying and selling of real estate;
  • management of bank, savings or securities accounts;
  • organization of contributions for the creation, operation or management of companies; or
  • creation, operation or management of legal entities or arrangements; and
  • buying and selling of business entities.

There is a further long list of activities, enacted in extensive and generic terms, to catch the same legal professionals when acting as trust and company service providers. The following are some noteworthy provisions:

  • Acting as formation agent of legal person (i.e. entities);
  • Acting as a trustee of trust;
  • Other designated non-financial businesses and professions as may be notified by the federal government.

Furthermore, the Act provides that when a legal person i.e. a company, association, foundation, partnership, or society, etc. commits an offence, everybody working there would be deemed to be guilty of the offence unless they prove that they either did not know about it or they tried to prevent such an offence.

All these provisions should be looked at holistically. Investigation and prosecution powers have been extended to the almost unending number of institutions or personnel. Delegation of the role of federal government to other institutions has the prospects of being used or abused by persons other than the ministers themselves. Political victimization can be hidden under the guise of “acts done in good faith” and sometimes without being noticed. Unmonitored and unnoticed activities of the FMU have no place in a democratic system. The power to arrest without court’s permission and/or the detention of a person at will can seriously harm the legal and justice system.

It is an unfortunate reality that in Pakistan a number of laws have been laid down in generic and extensive terms. Many laws, which even put the life of an individual at stake, have been passed in the vaguest and widest possible terms and with no clarity at all. This not only gives way to the abuse of laws by public officials but also explains the ineffectiveness of such laws to remedy the real problems.

  • What does ‘a reason to believe’ mean?
  • Why was the definition of such an important matter not included in the Bill?
  • How extensively can it be abused against companies, firms and professionals?
  • Why has its interpretation been left to those mandated with the duty itself?
  • And if the interpretation and the duty itself was left to them, why were they provided with a safe harbour to save themselves from any proceedings?
  • How can such blanket powers be justified when the terms that form the basis of all proceedings are left undefined?
  • How can everyone working in a company be criminalized?
  • How can the burden to prove innocence against an allegation be placed on an accused in such a case?

These questions do raise serious concerns, though it can be hoped that our honourable judiciary, concerned for fundamental rights and the prevalence of justice, will do its best to remove the harshness of such provisions. Whether judges can do something in this regard is a question which itself is not free of reservations. Judicial oversight is indeed the last resort. It is the duty of Parliament to play its constitutional role first.

A record of cases on money laundering reflects that the lives of the accused and their families are ruined even before they are granted any relief from the courts. This is why all legal professionals should be concerned about the new laws hanging over the heads of the citizens of Pakistan, especially those who are at risk of being abused for political or other affiliations.

The views expressed in this article are those of the author and do not necessarily represent the views of CourtingTheLaw.com or any organization with which he might be associated.

Sayyid Yousaf Raza

Author: Sayyid Yousaf Raza

The writer is a law graduate of the University of London and holds a Masters degree in Islamic and Arabic Studies from Wifaq-ul-Madaris. He currently serves as a Research Associate at Surridge and Beecheno, Lahore. He is also skilled in WordPress web development and can be reached at [email protected]

1 comment

This is a very good piece of comment on the legislation. No doubt, an in depth analysis.

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