Four years after it was placed on the “grey list” and penalised with severe financial strictures by the Financial Action Task Force, Pakistan won a major reprieve, as the international watchdog on terror financing and money laundering agreed to remove Pakistan’s name from the list of countries under “increased monitoring”.
In all, the FATF said Pakistan had completed two action plans comprising a 34-point tasklist in the period since 2018, and in a statement said that it “welcomes Pakistan’s significant progress” in its AML/CFT mechanisms.
India has protested Pakistan’s lack of action against cross-border terror groups responsible for attacks on India, but sources said went along with the final decision, as there was consensus in the room, and Pakistan had submitted “documentary evidence” of its actions against designated terrorists.
India’s other neighbour on the list, Myanmar was moved from the grey list to the “black list” due to actions by the military leadership after the 2021 coup, and will face even more severe financial sanctions and an inability to procure IMF, World Bank and ADB loans.
Financial Action Task Force (FATF)
It is an intergovernmental organization that designs and promotes policies and standards to combat financial crime.
Recommendations of the FATF target
- Money laundering
- Terrorist financing
- Other threats to the global financial system
The FATF was created in 1989 by the G7 countries, and is headquartered in Paris.
There are 37 members, including India and two regional organisations – European Commission and the Gulf Cooperation Council.
Grey list FATF
Member countries that have deficiencies in their anti-money laundering and counter terrorist financing (AML/CTF) regimes but they commit to an action plan to address these loopholes.
Currently, there are more than 20 countries on the grey list, including Pakistan.
Black list FATF
Member countries that have deficiencies in their anti-money laundering and counter terrorist financing (AML/CTF) regimes and do not end up doing enough.
As of now there are only two countries in the blacklist — Iran and North Korea.
While greylist includes countries which are considered as safe havens for supporting terror funding and money laundering, blacklisting will mean severe strictures on the countries banks and credit rating, as well as access to loans and foreign investments.
Pakistan has been under the FATF’s scanner since 2018, when it was put on the greylist for terror financing and money laundering risks.