FATF (Financial Action Task Force)
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The story so far:
- In June 2018, the Financial Action Task Force (FATF) placed Pakistan on the ‘grey list’ of jurisdictions under increased monitoring.
- Since then, it has been presented with multiple recommendations for compliance.
- Owing to Pakistan’s failure in fully implementing all the action points, it was once again retained on the ‘grey list’ following the conclusion of the latest FATF plenary on October 21, 2021.
- Pakistan was first put on the list in 2008, removed in 2009 and then again remained under increased monitoring from 2012 to 2015.
What is FATF?
- The FATF, a global money laundering and terrorist financing watchdog.
- It lays down international standards with an objective to prevent such activities.
- It keeps updating the standards to address emerging risks, monitors countries to ensure that they implement the recommendations fully and effectively and “holds countries to account that do not comply”.
What is the effect of ‘grey listing’?
- According to the FATF, when it places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes.
- Although no legal consequences follow grey listing, it is understood that the country’s access to international loans gets restricted.
Why was Pakistan retained in the ‘grey list’?
- Pakistan was ‘grey listed’ in June 2018, after the FATF found multiple strategic anti-money laundering (AML)/combating the financing of terrorism (CFT) deficiencies on its part.
- It was asked to implement the action plan for achieving 10 objectives.
- They included demonstration of effective action against U.N.-designated terror outfits, individuals and their associates in terms of financial sanctions, asset seizures, investigation, prosecution and convictions.
- At the October 2021 plenary, the FATF observed that Pakistan had completed 26 of the 27 action items in its 2018 plan.
- The one remaining item was about continuing to demonstrate that terror financing investigations and prosecutions targeted senior leaders and commanders of U.N.-designated terrorist groups.
- In response to the additional deficiencies later identified in Pakistan’s 2019 Asia Pacific Group Mutual Evaluation Report in June 2021, Pakistan had given further commitment to address the shortcomings with respect to a new action plan primarily focussed on combating money laundering.
How may Pakistan come off the list?
- The FATF has advised Pakistan that it should continue to work to address its other strategically important AML/CFT deficiencies by:
(1) providing evidence that it actively seeks to enhance the impact of sanctions beyond its jurisdiction by nominating additional individuals and entities for designation at the U.N.; and
(2) demonstrating an increase in money laundering investigations and prosecutions and that proceeds of crime continue to be restrained and confiscated in line with Pakistan’s risk profile, including working with foreign counterparts to trace, freeze and confiscate assets.
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