Retention of Pakistan in FATF’s “Grey List”

In News

• Recently, Financial Action Task Force (FATF)  has retained Pakistan on its terrorism financing “grey list” and asked to address at the earliest the remaining deficiencies in its financial system.

About 

• Pakistan has been on the grey list of the FATF since June 2018 for failing to check money laundering, leading to terror financing, and was given a plan of action to complete it by October 2019.
  • It was in the same category from 2012 to 2015 too. 
• Pakistan’s inclusion in the grey list can be attributed to the fact that the country’s anti-terror laws are still not in line with FATF standards and also with the latest UN resolution 2462 that pitches for criminalising terrorist financing.
  • This greylisting has adversely impacted its imports, exports, remittances, and limited access to international lending.
• Recently, the IMF asked Pakistan to complete the last remaining item in the 2018 AML/CFT action plan on the effectiveness of terror financing investigations and prosecutions of senior leaders of U.N.-designated terrorist groups, and promptly address the deficiencies identified in the APG’s Mutual Evaluation Report under the 2021 action plan.

What is the Financial Action Task Force?

• It is an inter-governmental decision-making body. 
• It was established in July 1989 by a Group of Seven (G-7) Summit in Paris, initially to examine and develop measures to combat money laundering.  
• In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.  In April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.
• Its Secretariat is located in Paris.
• Members :
  • The FATF has 39 members including two regional organisations — the European Commission and the Gulf Cooperation Council. India is a member of the FATF consultations and its Asia Pacific Group.
• India became an Observer at FATF in 2006. Since then, it has been working towards full-fledged membership. On June 25, 2010, India was taken in as the 34th country member of FATF.
• Functions:
  • Bring national legislative and regulatory reforms in money laundering and efforts to stop funding for weapons of mass destruction.
  • Review money laundering and terrorist financing techniques and continuously strengthen its standards to address new risks, such as the regulation of virtual assets, which have spread as cryptocurrencies gain popularity.  
  • Monitor countries to ensure they implement the FATF Standards fully and effectively and hold countries to account that do not comply with the standards.

• FATF Lists:
  • Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put on the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.
    • Enlisted nations: North Korea and Iran.
  • Grey List: Countries that are considered a safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.

Consequences of being in the FATF Grey List

• The countries in the grey list may face
  • Economic sanctions from IMF, World Bank, ADB.
  • The problem is getting loans from the IMF, World Bank, ADB and other countries.
  • Reduction in international trade.
  • International boycott.

Source:TH