The Financial Action Task Force (FATF) has once again placed Pakistan on its ‘greylist’ for increased monitoring, despite the country meeting 32 out of 34 action points directed towards curbing money laundering and terror financing. This decision comes as the FATF also includes the United Arab Emirates, a country with which India recently signed a free trade agreement. Presently, there are 17 countries on this grey list.
Pakistan’s Position in the FATF Grey List
After careful consideration of Pakistan’s progress, the FATF decided against changing its status, citing that two action points remain unaddressed. These points are primarily related to demonstrating results in combating financing of terrorism and money laundering. In his review, the FATF noted that while significant improvements were made, there was still work to be done. The FATF encouraged Pakistan to continue making progress as quickly as possible. Since making a high-level political commitment to work with the FATF and Asia/Pacific Group on Money Laundering (APG) in June 2018, Pakistan has seen substantial progress across a comprehensive Combating the Financing of Terrorism (CFT) action plan.
Background of Pakistan’s Inclusion on the Grey List
Pakistan was first included on the FATF’s grey list in 2008, removed in 2009, and then placed under increased monitoring again from 2012 to 2015. This inclusion on the list has significantly impacted Pakistan’s chances of securing financial aid from world bodies like the International Monetary Fund, World Bank, and Asia Development Bank.
Understanding the Financial Action Task Force (FATF)
The FATF is an inter-governmental body established in 1989 during the G7 Summit in Paris. The main purpose of the organization is to set standards and promote efficient implementation of legal, regulatory, and functional measures to combat money laundering, terrorist financing, and other threats to the integrity of the international financial system. It does not investigate individual cases but broadly evaluates a country’s anti-money laundering and anti-terrorist financing frameworks.
Headquarters and Member Countries
The FATF headquarters are located within the Organisation for Economic Cooperation and Development (OECD) offices in Paris, France. The FATF currently includes 39 members, among them India, as well as two regional organizations, the European Commission and Gulf Cooperation Council.
List Categories under FATF
The FATF categorizes countries under two lists: the Grey List and the Black List. Countries on the grey list are considered safe havens for supporting terror funding and money laundering, and their inclusion serves as a warning that they may enter the blacklist if they don’t take action. The black list comprises countries known as Non-Cooperative Countries or Territories (NCCTs) which actively support terror funding and money laundering activities. The list is regularly updated, adding or removing entries. Currently, Iran and Democratic People’s Republic of Korea (DPRK) are categorized as high-risk jurisdictions, under the black list.
FATF Meetings
The FATF Plenary, the organization’s decision-making body, convenes three times per year to evaluate and make decisions regarding the above aspects.
Last Modified: February 15, 2024