The FATF Grey List is an organization that tracks financial institutions that have been flagged as not meeting the standards set by the Organization for Economic Cooperation and Development (OECD). The organization has 37 member nations, two regional groups, and a number of other members. Its members have committed to upholding the highest standards of financial safety and soundness. The FATF also sets guidelines for the financial industry.
Pakistan removed from FATF grey list
The Financial Action Task Force, the global watchdog on money laundering and terrorism financing, has taken Pakistan off its grey list. The country had previously been on the list since 2008, but the watchdog decided that Islamabad has made enough reforms to comply with international standards. In a statement, FATF President Raja Kumar noted that Pakistan had implemented two action plans in the last year. “Pakistan has made significant progress in implementing these reforms, which is a significant step forward,” he said.
The removal of Pakistan from the FATF grey list vindicates the country’s efforts in battling extremism and terrorism. Prime Minister Shehbaz Sharif expressed his delight at the news and thanked the military and civil leadership. He also praised the efforts of the army chief General Qamar Javed Bajwa and all the political parties in the country.
The decision to remove Pakistan from the FATF grey list follows a visit by a FATF delegation in August and September. The delegation also submitted a report to the organization’s plenary meeting in October. During the visit, the group noted that Pakistan had made progress in enacting anti-money laundering legislation, but it cautioned that the country still has shortcomings that could constitute a vulnerability to the international monetary system.
The removal of Pakistan from the FATF grey list will ease foreign investment and boost the economy. Pakistan had been on the grey list due to strategic inadequacies in preventing and combating terrorist financing. However, the country is now taking steps to remedy the situation. This includes amending its laws and restructuring its coordination with law enforcement authorities and financial institutions.
The inclusion of Pakistan on the grey list may have cost the country $38 billion in GDP, but the impact of isolation from the international system was likely minimal. In addition to the GDP loss of $3.8 billion, Pakistan may have also experienced a significant decline in exports and foreign direct investment. But these losses would not have resulted in a severe economic crisis.
The Financial Action Task Force (FATF) is the world’s watchdog on money laundering and terrorism financing. In June 2018, Pakistan was placed on the FATF grey list due to insufficient efforts to combat terrorism financing. It has since complied with 34 of the 34 action points imposed by the organisation. It has also agreed to work with the APG to further improve its AML/CFT system.
Recommendation 10
The FATF has released an updated grey list of countries that do not comply with its standards and recommendations. Although the list is not comprehensive, it does include countries that are not full members. Non-member countries can attend FATF meetings as individual member-delegates of regional bodies and may intervene on operational and policy issues.
Countries that have been placed on the grey list are actively working with the FATF to address strategic deficiencies. The list is known as the “grey list” for a reason – countries are required to cooperate with the FATF in order to maintain their financial freedom. This is because governments that fail to comply will suffer serious financial penalties.
Countries that are not on the grey list are considered to be compliant with FATF standards. These countries are subject to FATF guidelines on money laundering and counter-terrorism financing. The grey list contains 23 countries. The countries on the list have made high commitments to comply with FATF standards, and aim to be removed from the list over time.
According to the FATF, financial institutions should report suspicious transactions when they suspect the proceeds are from terrorism or criminal activities. These offences are defined in the FATF document, and reporting them should be mandatory. The requirement should apply regardless of the size or value of the money involved, or whether or not the transaction is successful.
The FATF produces a consolidated assessment of countries that implement the standards in order to prevent money laundering and terrorist financing. These ratings take into account both technical compliance and effectiveness. For example, a country with a high score on consolidated assessment is considered to have an effective system for obtaining additional information. The new ratings reflect these factors, and are aligned with the revised Interpretive Note to Recommendation 5.
The grey list may increase the cost of financial services in developing countries, or it may result in the elimination of some financial services altogether. In developing countries, a country may be subject to de-risking by terminating or restricting business relationships with a non-compliant financial institution. In addition, financial institutions may lose profits due to increased regulatory burdens and AML/CFT obligations.
India trying to push Islamabad on blacklist
In an interview to BBC Urdu, Pakistan’s Foreign Minister said that India is trying to push Islamabad onto the FATF grey list. His comments come just days before a crucial plenary meeting of the FATF, which will decide if Islamabad is safe to do business in.
The Pakistani government has presented a 27-point action plan to the FATF, which will be evaluated separately to determine whether Pakistan should be removed from the grey list. However, Pakistan Prime Minister Imran Khan warned that India was actively trying to push Islamabad onto the blacklist, which would lead to harsh international sanctions and potentially bankrupting the country.
The New Delhi dossier lists many terrorists, including two of the top perpetrators of the 26/11 attack on Mumbai. In addition, the dossier names eight members of the UN’s terror list. Other notable convicted terrorists include Hafiz Saeed, Yahya Mujahid, and Zaki ur Rehman Lakhvi. In addition, Islamabad has convicted individuals who are linked to anti-India militant groups.
India’s recent claims about cross-border terrorism are not entirely credible. Pakistan is already facing significant domestic resistance in Indian-administered Kashmir, which complicates the task of getting it off the grey list. A black-listed Pakistan would pose even greater challenges for India.
Although Pakistan has taken some important steps towards addressing the problems, it still needs to show that it is taking serious steps to tackle its money-laundering and terrorist financing. It was placed on the FATF grey list in June 2018 and given a deadline to comply with the list.
