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UNCLAS SECTION 01 OF 02 ISLAMABAD 002866 
 
SIPDIS 
 
 
SIPDIS 
WARSAW FOR RSEAMAN, ABU DHABI FOR GMULLINAX 
STATE FOR SCA/PB AND EB/ESC/TFS LLAMBERT 
TREASURY FOR PDERGARABEDIAN, ASHARMA 
JUSTICE FOR LSAMUEL 
 
E.O. 12958: N/A 
TAGS: KTFN PTER EFIN PK
SUBJECT: HIGH LEVEL APG DELEGATION TO VISIT REGARDING STALLED AML 
LEGISLATION 
 
 
¶1.  (U) This is an action cable.  Please see paragraph 8. 
 
¶2.  (SBU) Summary: The Asia Pacific Group is sending a high level 
delegation to Pakistan July 2-3 in order to impress on the GOP the 
seriousness with which they regard Pakistan's lack of progress on 
passing anti-money laundering legislation, which has languished in a 
standing committee of Parliament for almost two years.  An amendment 
to the Banking Companies Act, which would have included many of the 
anti-money laundering provisions in the stalled bill, was attached to 
budget legislation, but was rejected by the Senate on June 23. 
Parliamentarian Haroon Piracha, a member of the Standing Committee on 
Finance in the National Assembly, expressed frustration at the lack 
of movement on the bill, but also voiced concerns over potential 
economic ramifications.  Piracha was unaware of the high-level 
mission as well as of the serious consequences that could result if 
the APG takes action against Pakistan for failing to pass an 
internationally acceptable anti-money laundering bill. We request 
instructions to demarche the GOP on these consequences, to ensure 
that the Government is cognizant of the possible ramifications of its 
foot dragging. End Summary. 
 
¶3.  (SBU) Background: In 2002, the Department of Justice (DOJ) worked 
closely with the GOP to craft an anti-money laundering (AML) bill 
that would meet international standards.  Before the bill could reach 
the Cabinet for a vote, it was changed in order to "harmonize" with 
the Indian AML legislation - which did not meet international 
standards, according to the DOJ.  Eventually the GOP revised the bill 
again; however, it still fell short of what was needed to meet 
Financial Action Task Force (FATF) requirements.  In September 2005, 
the AML draft legislation was approved by the Cabinet.  While it was 
closer to 
meeting international standards, it still fell short in several key 
areas; namely money laundering itself was not considered an 
independent crime, and asset seizure and forfeiture provisions were 
inadequate.  The bill was sent to the Standing Committee on Finance 
for review and possible amendment before being sent to a vote by the 
full National Assembly. 
 
¶4.  (SBU) On June 28, Econoff met with Parliamentarian Haroon Piracha 
from the ruling PML-Q party. Piracha, a US-educated banker, joined 
the Standing Committee on Finance in December 2006. Piracha informed 
Econoff the Standing Committee had completed its review of the bill 
and passed it back to the Ministry of Finance (MOF). 
 
¶5.  (SBU) The Standing Committee on Finance formed a subcommittee 
comprising 5-7 members in order to expedite the committee's final 
review of MOF changes before sending it to the full National Assembly 
for a vote.  Piracha said the subcommittee had not met yet.  (Note: 
In a conflicting statement, Javed Malik, Additional Secretary, 
Ministry of Finance, told Econcounselor June 12 that the bill was 
currently being reviewed by this subcommittee and that the 
legislation would be put into final form by June 25 and submitted to 
the National Assembly.  Malik was aware of the APG's impending visit 
and appeared anxious to demonstrate that progress was being made, but 
as of June 29, the bill is still in limbo. End Note) Econoff offered 
to have the Embassy's Legal Advisor review the final amendments with 
the subcommittee, an offer Piracha welcomed, once he returned from a 
trip abroad in a few weeks. 
 
¶6.  (SBU) Although he agrees that a comprehensive money-laundering 
bill should be passed, Piracha voiced concerns over its potential 
economic ramifications.  He feared that recent banking sector reforms 
that encouraged overseas Pakistanis to send their remittances through 
legal banking channels instead of hawalas or hundis could be undone. 
Concerns about monitoring of transactions might also discourage 
investment in Pakistan. The provision for asset forfeiture, he 
believed, could be abused for political reasons. Piracha promised to 
give us a copy of the final version of the bill. 
 
 
ISLAMABAD 00002866  002 OF 002 
 
 
¶7.  (SBU) Econoff informed Piracha that a high-level mission from the 
Asia Pacific Group (APG) was scheduled to visit Pakistan July 2-3 to 
discuss the status of the AML bill and the consequences of further 
inaction. (Note: The APG is a regional, FATF-like organization tasked 
with disrupting money-laundering channels.  End Note) Econoff 
informed Piracha of the negative ramifications if Pakistan were to be 
placed on the APG's "watch list." They include: the cessation of all 
correspondent banking relations between the U.S. and Pakistan; the 
generation of a Suspicious Transaction Report for all transactions 
involving Pakistani banks; and a three-day hold on all international 
money transfers cleared through U.S. banks.  Piracha expressed shock 
at the extent of possible APG sanctions, and agreed it was imperative 
Parliament pass the bill quickly. Piracha said all parliamentarians 
were concerned about the date of the next elections, and that if they 
happen more quickly than expected, the new legislature would have to 
start from "ground zero" with the AML bill.  Piracha believes the 
bill should be voted on no later than September in order to ensure 
this Parliament will review it, otherwise it will be another long 
wait. 
 
¶8.  (SBU) Action Requested: It does not appear that there is general 
awareness in Pakistan of the possible repercussions of failing to 
pass AML legislation in the near future.  The impending visit of the 
APG delegation is a signal that patience is wearing thin.  Post 
requests Demarche instructions for delivery to the GOP highlighting 
the consequences of being placed on the APG's watch list. 
 
 
 
PATTERSON