The Financial Action Task Force (FATF) has taken the decision to maintain Pakistan’s position on its ‘increased monitoring list,’ also referred to as the ‘Grey List.’
FATF’s Continued Monitoring of Pakistan
The FATF had presented a 27-point action plan to Pakistan in June 2018, when it was first placed on the Grey List. This plan focused on controlling money laundering and terrorist financing. Due to the Covid-19 pandemic, Pakistan was granted an extension until February 2021 to fully comply with this action plan during the October 2020 Plenary. However, by this extended deadline, Pakistan had still not fully adhered to six of the 27 directives.
As of February 2021, the FATF recognized that Pakistan had made significant progress in combating terrorism. Yet, it failed to fully implement three points from the action plan, which focused primarily on financial sanctions and penalties against terrorist funding infrastructure and entities involved.
Points of Non-Compliance
The FATF noted that Pakistan had not taken sufficient measures against UN-designated terrorists such as Hafiz Saeed, who is accused in the 26/11 case, and Jaish-e-Mohammed chief Masood Azhar. However, it is worth noting that Pakistan has successfully completed 26 out of the 27 action items.
The FATF has encouraged Pakistan to continue making progress, specifically addressing the one remaining Countering Finance of Terrorism (CFT)-related item. To demonstrate this, Pakistan needs to show that Terror Financing investigations and prosecutions target top figures and commanders of UN-designated terrorist groups.
Furthermore, the FATF issued another list of six tasks, mainly related to actions against money laundering, for Pakistan to complete. These include amending the Money-Laundering Act, cracking down on Designated Non-Financial Businesses and Professions (DNFBPs), and implementing sanctions for non-compliance.
Implications of FATF’s Decision
The inaction of Pakistan against several prohibited organizations involved in raising funds for terror activities has been noticed by the FATF. These organizations have links to global terrorists like Masood Azhar, Hafiz Saeed, and Zaki-Ur Rahman Lakhvi. India has also frequently highlighted the involvement of elements within Pakistan in various terror cases, such as the 26/11 Mumbai and Pulwama attacks.
A continuous presence of Pakistan on the FATF’s grey list would likely increase pressure on the country to implement adequate measures to prevent terrorist attacks from its soil. While the grey listing does not carry any legal sanctions, it does impose economic restrictions and limits access to international loans. Pakistan’s Foreign Minister estimated a yearly loss of $10 billion to the Pakistani economy for each year that the country remains on the grey list.
The Role of FATF
Established in 1989 during the G7 Summit in Paris, the FATF is an inter-governmental body that evaluates the robustness of a country’s frameworks against money laundering and terror financing. It doesn’t review individual cases, but instead concentrates on larger policy implications. Its main goal is to set standards and encourage enforcement of legal, regulatory, and operational measures to fight money laundering, terrorist financing, and other threats to the integrity of the international financial system.
The Secretariat of the FATF is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris. Currently, the FATF has 39 members, which includes two regional organizations – the European Commission and Gulf Cooperation Council. India is also a member of the FATF.
Under the FATF, countries deemed safe havens for supporting terror funding and money laundering are placed on the grey list. This warning implies that they might be added to the blacklist, which includes Non-Cooperative Countries or Territories (NCCTs) that support these illegal activities. The FATF regularly updates this blacklist, adding or removing entries as necessary. The decision-making body of the FATF, known as the Plenary, meets three times a year.
