The International Co-operation Review Group (ICRG) of the Financial Action Task Force (FATF) has suggested that Pakistan should continue to be on the “Grey List”. This suggestion was made due to the country’s inability to fully implement a 27-point action plan aimed at curbing terror financing. It’s important to mention that an ICRG recommendation often precedes the final decision made during the FATF plenary session, which is rarely overturned. Established in 2007, the ICRG analyzes high-risk jurisdictions and recommends specific actions to curb money laundering and terror financing risks.
FATF Plenary and its Role
The decision-making body of the FATF is the FATF Plenary, which holds meetings thrice every year. The most recent meeting is set to conclude on February 21st, 2020, and during this session, the final decision regarding Pakistan will be made. This meeting is scheduled just a week after an anti-terrorism court in Pakistan sentenced Hafiz Saeed, the mastermind behind the 2008 Mumbai attack and founder of Lashkar-e-Taiba (LeT), to 11 years in two terror financing cases.
The Background of Pakistan’s Presence on the Grey List
During the FATF plenary held in October 2019, it was noted that Pakistan had only addressed five out of the 27 tasks assigned to it concerning controlling the funding of terror groups like the Lashkar-e-Taiba, Jaish-e-Mohammad (JeM) and Hizbul Mujahideen. These groups are held responsible for a series of attacks in India. Consequently, the FATF urged Pakistan to complete its full action plan swiftly by February 2020. Pakistan was added to the grey list by the FATF in June 2018 and was given an action plan to complete by October 2019 or risk being placed on the black list alongside Iran and North Korea.
Pakistan’s Current Stance and India’s Response
At the FATF Asia Pacific Joint Group meeting held in Beijing in January 2020, Pakistan was adjudged to have cleared 14 points. Since then, it has taken significant measures against terror financing, resulting in an unprecedented number of convictions, including that of Lashkar-e-Taiba (LeT) chief Hafiz Saeed. However, India maintains that Pakistan regularly supports terror groups and has urged the FATF to take action against the country. India insists that despite Islamabad’s recent actions against individuals like Saeed, terror funding operations are ongoing and outfits such as the LeT and Jaish-e-Mohammed operate freely in Pakistan.
Pakistan’s Position on the FATF Grey List
For Pakistan to move from the ‘Grey List’ to the ‘White List’, it needs 12 out of 39 votes from the member countries of the FATF. To avoid being placed on the ‘Black List’, it requires the support of at least three countries. At the Beijing 2020 meeting, Pakistan received support from Malaysia, Turkey, and China, which is currently the chair of the FATF.
Impact on Pakistan if it Remains on the Grey List
Continuing on the grey list could pose challenges for Pakistan in securing financial aid from the International Monetary Fund (IMF), the World Bank, and the European Union. This could significantly worsen the already precarious financial condition of the country.
About the Financial Action Task Force (FATF)
The FATF is an inter-governmental organization established in 1989 at the G7 Summit in Paris. Its key objective is to establish standards and promote the effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the international financial system. The FATF currently has 39 members, including two regional organizations — the European Commission and Gulf Cooperation Council. India is a member of the FATF.
The Grey and Black Lists under FATF
Countries that provide a safe haven for terror funding and money laundering activities are included in the FATF grey list, serving as a warning that they might be included in the blacklist. Countries known as Non-Cooperative Countries or Territories (NCCTs) that support terror funding and money laundering activities are put on the blacklist. Entries on this list are regularly reviewed, added, or deleted by the FATF.