Pakistan has been removed from a list of nations subject to “enhanced surveillance” for funding terrorism, known as the grey list, by the Financial Action Task Force (FATF), a worldwide organization that keeps tabs on money laundering and terrorist financing. The decision was taken by the FATF in its plenary held in Paris on October 20 and 21. However, the nation known for harbouring terrorists will continue to work to improve its systems to prevent money laundering and terror financing in the country, FATF said in a statement.
The Paris-based organization said, “Pakistan is no longer subject to FATF’s increased monitoring process; to continue to work with APG (Asia/Pacific Group on Money Laundering) to further improve its AML/CFT (anti-money laundering & counter-terrorist financing) system.”
FATF made the latest report on Pakistan. In its report, the organization observed, “Overall, Pakistan has made good progress in addressing the technical compliance deficiencies identified in its MER (mutual evaluation report).”
FATF said, “Pakistan has strengthened the effectiveness of its AML/CFT regime and addressed technical deficiencies to meet the commitments of its action plans regarding strategic deficiencies that the FATF identified in June 2018 and June 2021, the latter of which was completed in advance of the deadlines, encompassing 34 action items in total. Pakistan is therefore no longer subject to the FATF’s increased monitoring process. Pakistan will continue to work with APG to further improve its AML/CFT system.”
What is the FATF grey list?
The FATF placed Pakistan on its grey list more than four years ago for failing to control the danger of money laundering, which may result in corruption and the financing of terrorism. For Pakistan to shift from the grey list to the white list, 12 votes out of 39 are required. It needs the backing of three nations to get off the blacklist. Pakistan has benefited from assistance from friendly nations like China, Turkey, and Malaysia on several occasions to avoid being included on the blacklist.
A nation that FATF believes to be a shelter for money laundering and terrorism financing gets placed on its grey list. It suggests that “strategic weaknesses” in a country’s anti-money laundering and anti-terror funding laws have been found. It is a warning to the nation to address the problems or risk being blacklisted, the most serious degree of the indictment. Iran and North Korea are the only two nations that have been blacklisted thus far.
Why Pakistan came out of the FATF grey list?
The agency stated in October 2021 that Pakistan had resolved 30 of the 34 issues for which it had expressed concerns and suggested further compliance. In order to fight money laundering and stop the funding of terrorism, it was observed that Pakistan’s legal, financial, regulatory, investigation, prosecution, judicial, and non-government sectors were lacking.
A few major action items, including Pakistan’s failure to act against terrorists listed by the UN, such as Lashkar-e Taiba founder Hafiz Saeed, Jaish-e-Mohammed (JeM) leader Masood Azhar, and his dependable assistant and the group’s “operational commander,” Zakiur Rehman Lakhvi, were unfulfilled as of June 2022. In its July 2022 report, FATF rated the country on the remaining four parameters as “Largely Compliant,” “Compliant,” “Largely Compliant and “Partially Compliant,” respectively.
According to a report by the Times of India, Michael Kugelman, director of the South Asia Institute at the Washington-based Wilson Center think-tank said, “When Pakistan, in recent months, announced new sentences for Hafiz Saeed and Sajid Mir – two top terrorists of Lashkar-e-Taiba, one of the key terrorist groups under the FATF spotlight – that’s what got things done in the end.” These two terrorists were involved in conspiring the 2008 Mumbai attacks in India that killed over 160 people.
Effects of greylisting
When dealing with nations on a grey list, the FATF emphasizes the need to take associated risks into account. Islamabad’s troubles with receiving financial assistance from the International Monetary Fund (IMF), the World Bank, the Asian Development Bank (ADB), and the European Union (EU) have gotten worse as a result. According to a study released by the Islamabad-based think tank Tabadlab, Pakistan’s repeated inclusion on the FATF’s grey list from 2008 to 2019 may have caused a $38 billion loss in GDP overall.
Will Pakistan really benefit from this?
Pakistan would effectively gain a bit of a reputation boost and a clean bill of health from FATF if it were taken off the list. According to economist and former Citigroup banker Yousuf Nazar, it would lessen monitoring of international transactions involving Pakistan while having little effect on the country’s suffering overall economy.
Two significant banks in Pakistan, HBL and the National Bank of Pakistan, each paid fines of $55 million and $225 million to US authorities for anti-money laundering and compliance failings in 2017 and 2022, respectively. Pakistan would benefit from being taken off the FATF list after Moody’s reduced the nation’s sovereign credit rating. Additionally, it would raise spirits, which is significant in terms of foreign direct investment.