Drivers, Aims and Effects of Money Laundering and Terrorism Financing Regulation in Pakistan
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REGULATORY TRANSGRESSION? DRIVERS, AIMS AND EFFECTS OF MONEY LAUNDERING AND TERRORISM FINANCING REGULATION IN PAKISTAN SANAA AHMED A DISSERTATION SUBMITTED TO THE FACULTY OF GRADUATE STUDIES IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY GRADUATE PROGRAM IN LAW YORK UNIVERSITY TORONTO, ONTARIO AUGUST 2019 © Sanaa Ahmed, 2019 ii ABSTRACT The harmonization of money laundering and terrorism financing regulation is a key feature of the contemporary global economy. Since 9/11 particularly, the remarkable growth of this field of regulation has been characterized by both scale and intensity. However, this drive towards regulatory convergence is puzzling: the efficacy of the regulation remains unproven while the content of the regulation poses significant challenges to both criminal justice systems and human rights frameworks. The corollary to these observations: who does the regulation benefit? With the understanding that all regulation is an expression of some interest/s, this study analyses the trajectory of this global regulation and its products. My aim is to understand who gains what from regulation and how they influence this regulatory evolution. Focusing on Pakistan, my research will examine how anti money laundering (AML) and counter terrorism financing (CTF) regulation and its increasing demands for information affects established power hierarchies in states, between states and among states. At the international and transnational levels, I’m interested in how a universal financial regulation discourse threatens basic rights and freedoms and how this exercise of power affects civil, political and economic rights in a country, its foreign policy as well as geopolitics. At the national level, I’m curious about how such regulatory power with its distinctive objectives interacts or conflicts with or even amplifies the control of established power centres in a polity. The analysis of power relations in the case of Pakistan will be particularly instructive for several reasons. First, the size of its formal economy is rivalled (if not surpassed) by the informal or black economy and the money laundering industry is all the more powerful for processing illicit funds from crime; corruption; and trade- and taxation-related malpractices. Second, Pakistan’s military establishment has long supported militancy as a foreign policy tool, both materially and financially, and to date orients its foreign policy accordingly. Finally, the military establishment also relies on intrusive surveillance tools to control civil society. The opacity of the discourse regarding international financial governance makes a closer scrutiny of its aims a critical imperative. By exploring the links between regulation, power, knowledge and surveillance, I hope to understand the aims of this power and offer a critique of financial regulation as a technique of power and the politics of making and administering AML/ CTF regulation, both across the globe and within states. iii DEDICATION For Rameez, Baba and Margaret iv ACKNOWLEDGEMENTS The debts accumulated in the course of this project are too enormous to be cited in full but I’d particularly like to acknowledge the support and encouragement of my supervisor Margaret Beare. She gave me the space to develop my ideas but then pushed me to redefine my own limits as a scholar. Her strength, humour and generosity were legendary: she continued to provide feedback on my dissertation even while she was in hospital undergoing treatment for cancer, simultaneously cracking jokes about her wigs and how some of my chapters helped her sleep better than the meds! This project would not have been what it is without her. My supervisory committee, Professors Obiora Okafor and Robert Wai, were extraordinarily generous with their time and indulgent about my idiosyncrasies – I know now that a chapter ought not be presented as an ‘extended defence proposal’ and that the McGill guide does matter. Thanks, particularly, to Professor Frank Pearce for long, rambling conversations about the nature of power and the subtleties of Gramsci but also for indulging my Foucault obsession. Professors Hengameh Saberi and Liora Salter provided incisive comments on various drafts; a special thanks to Liora, who stepped in when Margaret was sick and got me to the defence stage. A special shout out to the Graduate Office at Osgoode that made sure everything else went smoothly. Since most such projects have longer gestation periods than the time it takes to write them, particular thanks are due to two mild-mannered, absent-minded men who instilled in me a love of the study of law and a healthy suspicion of power. The first taught me to read the law as potentiality; the second, to read law as politics. One would ask why the courts couldn’t positively enforce fundamental rights against private persons in addition to public authorities; the other would gently deride what he called Trade-Related Market-Friendly Human Rights. The first was my father, Sabihuddin Ahmed, a judge at the Supreme Court of Pakistan; the second, Upendra Baxi, my thesis supervisor at the University of Warwick. That said, this PhD would not have happened without the love and support of my family and friends – debts that will take a lifetime to repay. My mother Nelofer Ahmed and my brother Salahuddin pushed me to do it but my darling baby brother Rameez was the one who truly believed I could fly. Ammara bore the brunt of most of my meltdowns; Lala made sure I didn’t have to cook while I was writing and Menaal fixed footnotes, edited presentations and read so many drafts, she should also qualify as a money laundering expert. Friends on four continents overcame time differences, opened their homes and provided copious amounts of emotional support, food and drink – Rabeea, Mamun, Arusha, Faisal, Asma Z., Shazi, Bashir, Arifa, Saad & Radha, Ateeq and Chris. Other friends shared their expertise, contacts and time to ensure I completed my fieldwork in six weeks – Shoaib, Zia, Talat, Azmat, Aamer and Riaz. Above all, thanks to my nieces Ayla and Zaha, who continue to remind me why it is important to do the work one does. v TABLE OF CONTENTS Abstract…………………………………………………………………………………….......ii Dedication……………………………………………………………………………………..iii Acknowledgements……………………………………………………………………………iv Table of contents ………………………………………………………………………............v List of acronyms ……………………………………………………………………………..viii Chapter 1: Introduction………………………………………………………………………….1 1.1 Why AML-CTF?.....................................................................................................................1 Hypothesis…………………………………………………………………………………...5 Alternate hypothesis…………………………………………………………………………6 1.2 Why Pakistan?.........................................................................................................................6 1.3 Research design……………………………………………………………………………...9 Conceptualisation and operationalisation…………………………………………………....9 Methodology, data collection and sampling strategy..……………………………………...11 Literature review……………………………………………………………………………11 Interviews…………………………………………………………………………………...12 Documentary analysis………………………………………………………………………13 Researcher positionality…………………………………………………………………….15 Limitations of the study……………………………………………………………………..16 1.4 Project overview…………………………………………………………………………….17 Chapter 2: Re-reading power inside the AML-CTF regime…………………………………….19 2.1 Power, defined……………………………………………………………………................20 2.2 Originary power……………………………………………………………………………..36 2.2.1 Constructive practices……………………………………………………………...........37 2.2.2 Instrumental power……………………………………………………………………...46 2.2.2.1 Category A………………………………………………………………………………47 Thinking power…………………………………………………………………….........47 Bureaucratic power……………………………………………………………………...52 2.2.2.2 Category B…………………………………………………………………………........56 Science as fetish……………………………………………………………………........56 Crisis as vehicle…………………………………………………………………………60 Divisive power……………………………………………………………………..........63 2.2.2.3 Category C………………………………………………………………………………67 vi Dressage…………………………………………………………………………………67 2.3 Interaction of powers..........................................................………………………………….71 2.4 Conclusion…………………………………………...............................................................83 Chapter 3: Drugs, terrorism and weapons of mass destruction: power relations within global AML-CTF regulation…………………………………………………………………................86 3.1 Historical evolution………………………………………………………………….............88 3.2 Present-day…………………………………………………………………………………..96 3.3 Of harms, inadvertent and deliberate……………………………………………………….104 Conceptual problems…………………………………………………………………...104 Structural/ procedural problems………………………………………………………..118 Collateral damage………………………………………………………………………119 3.4 The missing link……………………………………………………………………………120 3.5 Conclusion………………………………………………………………………………….137 Chapter 4: Power politics: the causes of the non-implementation of AML-CTF regulation in Pakistan…………………………………………………………………………………………139 4.1 Pakistan’s AML-CTF regime………………………………………………………………140 4.2 Geopolitics at play………………………………………………………………………….148 4.3 Domestic politics…………………………………………………………………………...175 Military power………………………………………………………………………….177 Political power………………………………………………………………………….190 Judicial power………………………………………………………………………….192 4.4 Conclusion………………………………………………………………………………….198 Chapter 5: Looking backward to look forward: assessing the consequences of the AML-CTF regime in Pakistan………………...……………………………………………………………200