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FATF RETAINED PAKISTAN ON THE “GREY LIST”

Written by Talent KAS

Related Topics: Money Laundering, Terror Financing, International Organisations

News

  • Financial Action Task Force (FATF) has retained Pakistan on the “grey list” and gave a stern warning that it will be blacklisted if it does not fulfil the global standards criteria on combating terrorist financing by February 2020.
  • The terror financing watchdog discussed Pakistan’s actions for countering terror financing and anti-money laundering at the International Co-operation Review Group (ICRG) plenary in Paris.

Why Pakistan was retained on “Grey List”?

  • FATF noted that Pakistan addressed only five out of the 27 tasks given to it in controlling funding to terror groups like the Lashkar-e-Taiba, Jaish-e-Mohammad and Hizbul Mujahideen, responsible for a series of attacks in India.
  • It also expressed serious concerns with the overall lack of progress by Pakistan to address its terror financing risks, including remaining deficiencies in demonstrating a sufficient understanding of Pakistan’s transnational terror financing risks.
  • Pakistan’s allies Turkey and Malaysia, tacitly backed by current FATF chair China, provided three necessary votes needed by Pakistan to avoid blacklisting.

Economic Challenges faced by Pakistan

  • According to IMF, Pakistan is facing a number of economic challenges with its economy expected to grow at 3.3 % in 2019 and 2.6% in 2020.
  • Inflation is set to touch 7.3% in 2019, up from 3.9% in 2018, and rise to 13% in 2020.
  • Fiscal deficit was projected at 7.1% of GDP in 2020, the highest in the last seven years.

Impact on Pakistan

  • Though the move doesn’t amount to international sanctions, countries will be wary of investing in Pakistan knowing that it is not a jurisdiction seen as compliant with FATF rules.
  • Companies planning to invest in Pakistan will now find it difficult to raise money or will have to pay higher rates of interest while borrowing to invest.
  • FATF’s decision of retaining Pakistan in the grey list shows the unanimity of views within the grouping on Pakistan and its role in financing terrorists.
  • By making its warning to Pakistan public, FATF has given notice to global financial institutions that they need to ready their systems for the eventuality in February 2020.
  • Pakistan’s presence in the grey list makes it difficult for the country to get financial aid from the International Monetary Fund, the World Bank and the European Union, adversely impacting its economy.

Background

  • Pakistan was placed on the FATF’s grey list in February 2012, and had been removed from the grey list in February 2015 after it passed a National Action Plan (NAP) to deal with terrorism after the Peshawar School massacre in December 2014.
  • It was placed under severe restrictions in the years 2008-2012.
  • Pakistan was placed on the grey list by the FATF in June, 2018 and was given a plan of action to complete by October 2019, or face the risk of being placed on the black list with Iran and North Korea.
  • In August 2019, Asia/Pacific Group on Money Laundering (APG), a regional affiliate of FATF, had expressed concern over Pakistan’s performance owing to technical flaws.
  • It had placed Pakistan in the enhanced expedited follow-up list (blacklist) for its failure to meet standards.

[Source: The Hindu, Livemint]

 

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