FATF Grey List and Pakistan

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According to experts, Pakistan is likely to stay on the Financial Action Task Force’s (FATF) grey list until June 2021.

• The FATF’s Plenary and Working Group meetings will decide on Pakistan’s grey list status.

Background

• Pakistan has been on the FATF grey list since June 2018 and was asked to implement the FATF Action Plan fully by September 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.
• Pakistan remained unsuccessful in fulfilling the six key obligations of the global money laundering and terrorist financing watchdog that include failure to take action against two of India’s most wanted terrorists Maulana Masood Azhar and Hafiz Saeed.

Financial Action Task Force (FATF)

• It is an inter-governmental decision-making body. It was established in 1989 during the G7 Summit in Paris to develop policies against money laundering and its Secretariat is located in Paris.
• It brings national legislative and regulatory reforms in money laundering and it also works to stop funding for weapons of mass destruction.
• The FATF reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks, such as the regulation of virtual assets, which have spread as cryptocurrencies gain popularity. 
• The FATF monitors countries to ensure they implement the FATF Standards fully and effectively and holds countries to account that does not comply with the standards.
• India became an Observer at FATF in 2006. Since then, it had been working towards full-fledged membership. On June 25, 2010, India was taken in as the 34th country member of FATF.

 FATF ‘grey list’ and ‘blacklist’

• 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.
• 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.
  • As of 2020, FATF has blacklisted North Korea and Iran over terror financing and 12 countries are on the grey list, namely: Bahamas, Botswana, Cambodia, Ethiopia, Ghana, Pakistan, Panama, Sri Lanka, Syria, Trinidad and Tobago, Tunisia and Yemen.

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 in getting loans from the IMF, World Bank, ADB and other countries.
• Reduction in international trade.
• International boycott.

Source- Livemint