FATF, a global watchdog, has decided to keep Pakistan in grey list. Pakistan has been praised for the progress it has made to meet the action plan of FATF by the Pairs based watchdog’s President, Dr. Marcus Pleyer but the country will be on the grey list till February 2021. FATF found that Pakistan has largely addressed 21 out of 27 action items but it strongly urged Pakistan to fulfill all the items in order to get out of the grey list. Pakistan has been urged to work on certain areas to address its strategic deficiencies which are: demonstrating that law enforcement agencies (LEAs) are identifying and investigating the widest range of terror financing activity, demonstrating that terror financing prosecutions result in effective, proportionate and dissuasive sanctions, demonstrating effective implementation of targeted financial sanctions against all designated terrorists under resolutions 1267 and 1373 of the UNSC and demonstrating enforcement against violation of terror financing sanctions. The government of Pakistan has signaled its commitment to complete the rest of its action plan.
What is FATF?
The Financial Action Task Force (FATF) is a global money laundering and terrorist financing watchdog. It comprises of 35 member states. The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society. As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. Initially it was established in July 1989 to combat money laundering. In October 2001, FATF expanded its efforts to combat terror financing in addition to money laundering.
Objectives:
v Legal, regulatory and operational measures for combating money laundering.
v Urge the governments to check terror financing by implementing strong regulatory steps.
v In addition to the regulation of laundering and terrorist financing techniques; the FATF monitors the progress of the member countries on matters related to money laundering and terrorist financing techniques and counter-measures
v To counter human trafficking which has increased from USD 32 billion in 2011 to USD 150 billion in 2018.
v The FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.
Types of Lists:
FATF has 2 types of lists:
a. Blacklist: Countries knowns as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries. Iran and North Korea are on the blacklist.
b. Grey List: Countries that are considered 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:
Considered in the grey list may face
1. Economic sanctions from IMF, World Bank, ADB
2. Problem in getting loans from IMF, World Bank, ADB and other countries
3. Reduction in international trade
4. International isolation and boycott
5. Reduced investments
FATF & Pakistan
Pakistan has been in the FATF grey list since June 2018 and has been 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 [FZ1] that pitches for criminalising terrorist financing. What Pakistan has mostly done in the past is detain both Masood Azhar and Hafiz Saeed for 'apprehension' of breach of peace. The FATF seeks freezing of funds, denial of weapons access and travel ban.
While there were some arrests of LeT, JeM, JuD cadres, they were all apprehended under the country's Maintenance of Public Order Act and not the Anti-Terrorism Act, 1997.
Important Note
Pakistan is not a member state of FATF. Instead, it is a member of the Asia Pacific Group on Money Laundering (APG), which is an associate member of FATF.
Dr. Marcus Pleyer: Since Pakistan has completed 21 out of 27 items, but the 6 outstanding items are very serious that still have to be addressed.
[FZ1]calls upon UN Member States to combat and criminalize the financing of terrorists, reaffirms 1373.