Pakistan to remain in FATF’s ‘Grey List’ till February 2020: Reports

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News:The Financial Action Task Force (FATF) has decided to keep Pakistan on its grey list till February 2020.

Facts:

Pakistan and FATF:

  • In June 2018,Financial Action Task Force(FATF) had greylisted Pakistan for failing to curb anti-terror financing.
  • FATF had given 15 months to Pakistan to complete implementation of a 27-point action plan failing which it be placed in the Black List.
  • It had asked Pakistan to implement 40 measures against money laundering and terror financing by banned outfits and non-government entities through banking and non-banking jurisdictions among others.
  • However,a report released by the FATF’s Asia Pacific Group has stated that Pakistan has implemented only one of the 40 measures.As for the other 39 measures,they were either implemented partially or overlooked totally.
  • The Pakistan government had also not made institutional changes to tackle terrorism financing and these organisations have come up under different names.

Additional information:

About FATF:

  • The Financial Action Task Force(FATF) is an inter-governmental body established in 1989 on the initiative of the G7.
  • It is a policy-making body which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas.
  • The FATF Secretariat is housed at the OECD headquarters in Paris, France.

Objectives:

  • The objectives of the FATF are to (a) set standards and promote effective implementation of legal, regulatory and operational measures (b) for combating money laundering (c)terrorist financing and (d) other related threats to the integrity of the international financial system.

Listing by FATF:FATF maintains two different lists of countries:

  • Grey list:The grey list contains those countries that have deficiencies in their anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.But they commit to an action plan to address these loopholes, 
  • Black list:These countries are those that do not end up doing enough even after having deficiencies in their anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.

Which countries are listed?

  • As of now there are only two countries in the blacklist which are Iran and North Korea.
  • Further,there are seven countries on the grey list which includes countries such as  Pakistan, Syria , Yemen among others.

Implications of listing:

  • Once a country is on grey list,the country is downgraded by institutions like IMF, World Bank, ADB, EU and also reduction in risk rating by Moody’s, Fitch and S&P.
  • Further,if the country is blacklisted,FATF calls on other countries to apply enhanced due diligence and counter measures,increasing the cost of doing business with the country and in some cases severing it altogether.