POST RESPONSE TO CSG TASKING ON CFT CAPABILITIES

C O N F I D E N T I A L SECTION 01 OF 03 ISLAMABAD 002799 SENSITIVE SIPDIS E.O. 12958: DECL: 11/17/2019 TAGS: EAID ECON EFIN PGOV PREL SNAR PK SUBJECT: POST RESPONSE TO CSG TASKING ON CFT CAPABILITIES REF: A. STATE 112368 ¶B. ISLAMABAD 1992 ¶C. ISLAMABAD 2495 ¶D. ISLAMABAD 1845 Classified By: Anne W. Patterson for reasons 1.4 (b) and (d). ¶1. (C/NF) Mission Islamabad provides the following response to Ref A request for information on the Mission's resources and for staff combating terrorist financing in Pakistan. ¶2. (C//NF) Embassy Islamabad has dedicated the following resources to terrorism finance issues, at least part-time. Interagency efforts are coordinated within the Law Enforcement Working Group (LEWG) and a subgroup that specifically focuses on combating the financing of terrorism (CFT) issues. The LEWG meets monthly, and the subgroup meets on an as-needed basis to track overall progress and discuss new developments; it can be convoked by any member. Members of both working groups meet in smaller groups on a regular basis to discuss ongoing activities. ¶3. (C//NF) The Mission's Terrorism Finance Coordinating Officer (TFCO) is: Martha Patterson Economic Counselor 92512082927 pattersonme@state.gov Other officers working on terrorism finance issues consist of: Office Number of Employees State 2 (works on CFT and other issues) DHS 1 (works on CFT and other issues) FBI 2 (works on CFT and other issues) Treasury 1 (works on CFT and other issues) DOJ 1 (works on CFT and other issues) Other 2 (works on CFT and other issues) ¶4. (C//NF) The Pakistani interlocutors in the Federal Investigation Agency (FIA),the State Bank of Pakistan (SBP), and the Ministry of Finance (MOF) with whom post interacts are committed to CFT and regularly work with post on mutually agreeable ways to improve their own capacity and abilities. While problems in the existing Anti-Money Laundering Ordinance at times make it challenging to properly enforce CFT, these law enforcement and regulatory agencies are adapting and using other laws to tackle terrorism finance, and recently Pakistan's large unregulated remittance sector (REF B). However, there are some Government of Pakistan (GOP) agencies, such as the Anti-Narcotics Force (ANF) and the Ministry of Foreign Affairs (MFA),that have not been responsive to cooperation and requests for assistance from post. ¶5. (C//NF) Federal Investigation Agency (FIA): The Director General (DG) of the FIA , Tariq Khosa, is committed to CFT, seeking to expand his agency's own capabilities, and taking active steps to participate with other GOP agencies. For the past several months, the FIA has allowed FBI and Treasury technical advisors to train FIA personnel on CFT and anti-money laundering (AML). The DG has also expressed an interest to receive more advanced training in the next several months. Indicative of the FIA's commitment to AML/CFT, the DG recently established the Economic Crime Wing, which is cooperating with the State Bank of Pakistan (SBP) on developing cases against large, illegally-operating money exchange or money service operations. Khosa indicated he will continue to investigate large, licensed money exchange companies that are conducting unreported transactions and remittances. ¶6. (C//NF) On counterterrorism, the FIA has also established the Special Investigation Group (SIG) to investigate cases of terrorism and terrorist financing. SIG's duties include the identification of terrorists, creation of a National Database of terrorists, identifying and arresting "most wanted ISLAMABAD 00002799 002 OF 003 terrorists," and coordinating with provincial governments in the national counterterrorism effort. SIG has multi-disciplinary teams investigating terrorism and terrorism financing and is taking steps to develop its financial investigations capacity to better pursue terrorist financing cases. Significantly, the Mumbai attacks investigation and prosecution are the first instance when the FIA has aggressively pursued terrorist financiers. Of all the suspects indicted in connection with the Mumbai attacks, nine are financiers ) two of whom are in police custody (REFS C and D). ¶7. (C//NF) Financial Monitoring Unit: The Financial Monitoring Unit (FMU),Pakistan's version of a Financial Intelligence Unit (FIU),was established in December 2007 as a national center for the receipt, analysis, and dissemination of suspicious transaction reports (STRs) and other data related to money laundering and terrorism finance. Until July 2009, funding and personnel shortages constrained the FMU from effectively monitoring the activities of financial institutions. Nevertheless, the FMU still has a long way to go towards meeting international standards for an FIU. The FMU has begun to expand its hiring, and overall there has been an increase in STRs since the beginning of the year. Despite its young history and modest resources, the FMU has earned respect from other GOP agencies. ¶8. (C//NF) In an early-November meeting with the LEGATT and Treasury Attache, the DG of the FIA wanted the FMU to be a "nerve center" for all law enforcement agencies on AML/CFT. The DG of FIA wanted representatives from the FIA, ANF, and the National Accountability Bureau (NAB) to work in the FMU, and help in the analysis and dissemination of STRs. Problems occur, however, because law enforcement agencies cannot ask financial institutions for additional information related to an STR without a warrant, and courts will not grant a warrant if the only evidence provided is an STR. ¶9. (C//NF) Ministry of Finance: The Ministry of Finance is the lead GOP agency in advancing the promulgation of a law governing AML/CFT. Recently, the Finance Minister, the Finance Secretary, the Minister of State for Economy, and senior Finance Ministry Bureaucrats have been consistently pushing the National Assembly to pass a new AML Bill, which includes amendments that seek to correct concerns from the Asia Pacific Group and World Bank. In a November 10 meeting with the Treasury Attache and Treasury's Deputy Assistant Secretary for Technical Assistance, Acting Finance Secretary Rana Asad Amin announced the MOF intended to create an office in the MOF to coordinate GOP policy on AML/CFT within the MOF, and the GOP at large. ¶10. (C//NF) Pakistan Anti-Narcotics Force (ANF): The ANF has been less than a full partner with the Drug Enforcement Administration (DEA) in counternarcotics efforts. Since 1999 DEA has funded a Sensitive Investigation Unit (SIU) within the ANF; however, a lack of commitment and cooperation by ANF forced DEA to withdraw funding at the end of FY 2009. Nonetheless, the Mission and DEA believe that looking to the future best serves U.S. counternarcotics goals in Pakistan and so other program options are being explored, but not at the same level as years past. ¶11. (C//NF) The unhelpful attitude toward DEA (and the international drug liaison community as a whole) arrived almost three years ago with the appointment of a former ISI Major General to head ANF. His policies led to limitations on cooperation and tight control on information and intelligence sharing. The recent appointment of a new Director General of the ANF could be positive, but it is too early to assess what, if any changes, will be made. Despite having the legal authority to do so, ANF does not pursue long-term investigations targeting the highest level of violator, but focuses its efforts on interdiction and arrests of low level traffickers. Similarly, while they have the legislated authority to conduct money laundering ISLAMABAD 00002799 003 OF 003 investigations, they do not pursue these cases. ¶12. (C//NF) Ministry of Foreign Affairs: The MFA stands out as the least responsive interlocutor on terrorism finance. Official demarches on recommended UN 1267 Committee designations rarely invoke a substantive response. Officials at the MFA often speak in generalities about mutual terrorist threats, and the overall importance of the United Nations Security Council. MFA officials routinely deflect questions to other offices or officials within the MFA. When post tries to follow up with a particular demarche, MFA officials consistently refuse to address the substance of the demarche ) even after the USG addressed previous MFA concerns. On 1267 designations, the GOP routinely uses the People's Republic of China to stall or prevent designations at the United Nations Security Council 1267 Committee. PATTERSON