Financial Action Task Force (FATF), a global money-laundering watchdog, has maintained Pakistan on its ‘greylist’ or ‘increased monitoring list’ due to the country’s failure in implementing global FATF standards effectively. This announcement also includes the greylisting of Jordan, Mali and Turkey, whilst Botswana and Mauritius have been removed from the greylist.
Pakistan’s Status – A Closer Look
Pakistan’s persistence in the greylist is attributed to its lack of progress on investigations and prosecutions of senior leaders and commanders of UN-designated terror groups. The FATF mandated Pakistan to address all items on the original action plan agreed in June 2018 and on a parallel action plan given by FATF’s regional partner, the Asia Pacific Group (APG), in 2019. Pakistan must work on these two concurrent action plans, which involve a total of 34 items, of which, they have addressed 30.
Significantly, Pakistan has made considerable advancement, with 26 out of 27 items on the initial action plan being addressed. However, the issue of financial terrorism remains unresolved. In addition, the 2019 action plan primarily directed efforts towards remedying money laundering deficiencies.
FATF’s Recommendations for Pakistan
The FATF has urged Pakistan to continue working on six strategically important deficiencies, including amending the money-laundering law and demonstrating foreign assistance in implementing the UNSCR 1373 designations. UNSC Resolution 1373, adopted on September 28, 2001, identifies international terrorism as a threat to international peace and security and imposes binding obligations on all UN member states.
Perks and Perils of Greylisting
Pakistan’s inclusion in the greylist has a significant adverse effect on its prospects to obtain financial assistance from global bodies like the International Monetary Fund, World Bank, and Asia Development Bank. Conversely, removal from this list, as experienced by Botswana and Mauritius, can positively enhance a country’s economic and financial standing.
Understanding FATF
The FATF is an inter-governmental organization established in 1989 during the G7 Summit in Paris. It evaluates the capacity of a country’s anti-money laundering and anti-terror financing frameworks but does not consider individual cases. The key objectives include setting standards and promoting effective implementation of legal, regulatory, and operational measures to fight money laundering, terrorist financing, and other related threats to the integrity of the international financial system. FATF’s Secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris. Currently, it has 39 members, including the European Commission and Gulf Cooperation Council, with India being a member.
FATF Lists and Their Implications
The FATF maintains two lists. The Grey List includes countries considered as safe havens for supporting terror funding and money laundering, serving as a warning that they may enter the blacklist. The Black List, on the other hand, includes Non-Cooperative Countries or Territories (NCCTs) supporting terror funding and money laundering activities. The list is revised regularly, with current blacklisted countries being Iran and the Democratic People’s Republic of Korea (DPRK). The FATF Plenary, which meets thrice annually, is the decision-making body of the FATF.