Amjad Mehmood
Pakistan is yet again placed on the grey list till Feb 2022 by FATF. This news has gripped the country since June 2018 and there are plenty of questions an ordinary person has in mind to know about FATF and the grey list with its implications for Pakistan.
report based on important facts for readers to answer the probable questions.
What is FATF:
The Financial Action Task Force (FATF) is a global money laundering and terrorist financing watchdog organization comprised of an inter-governmental body to set international standards for prevention of illegal activities to avoid the society from harmful effects. Primarily, FATF works to generate the necessary political will to implement national legislative and reforms in these areas. Over 200 countries and jurisdictions are committed to implementing these legislative and reforms which are mainly called FATF recommendations or FATF standards to ensure a well-coordinated global response to thwart organized crime, corruption and terrorism. It helps concerned authorities to chase the money of criminals dealing in illegal drugs, human trafficking and other crimes. FATF also halts the funding opportunities for organizations or groups of individuals who work on weapons of mass destruction. FATF Secretariat is located at OECD Headquarters in Paris comprising on multicultural, dedicated team of professionals from 15 countries, with 10 languages and years-long expertise from law enforcement, intelligence agencies, financial intelligence units, policy advisors and the legal profession. FATF decision-making body known as “FATF Plenary” meets three times in a calendar year i.e., February, June and October.
What FATF does?
In July 1989, the Financial Action Task Force (FATF) was established by a Group of Seven (G-7) Summit in Paris to combat money laundering. Later in October 2001, the FATF started efforts to combat terrorist financing and from April 2012, expanded its mandate to counter the financing of proliferation of weapons of mass destruction. To safeguard the integrity of international financial system in April 2019, FATF Ministers have adopted a new mandate by introducing set standards for effective implementation of legal, regulatory and operational measures to combat money laundering, terrorist financing and other related threats. Considering its core function, the FATF reviews money laundering and terrorist financing techniques and regularly strengthens its standards to address new risks for example the regulation of virtual assets, which have recently spread at large scale as cryptocurrencies. FATF closely monitors the countries to implement its defined standards effectively and holds accountable the ones deviating from compliance. Other than member states, FATF monitors other countries’ progress in implementing its recommendations, reviews money laundering and terrorist financing techniques and their counter-measures. FATF also promotes the adoption and implementation of the FATF recommendations globally.
Who are the FATF Members & Observers?
Currently, FATF comprises 37 member jurisdictions and 2 regional organizations, representing most major financial centers around the world. The names include following: –
Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Denmark, European Commission, Finland, France, Germany, Greece, Gulf Co-operation Council, Hong Kong-China, Iceland, India, Ireland, Israel, Italy, Japan, Republic of Korea, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Portugal, Russian Federation, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, United Kingdom and United States.
Indonesia has the FATF observer status whereas, followings are the FATF associate members: –
Asia/Pacific Group on Money Laundering (APG), Caribbean Financial Action Task Force (CFATF), Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), Eurasian Group (EAG), Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), Financial Action Task Force of Latin America (GAFILAT) (formerly known as Financial Action Task Force on Money Laundering in South America (GAFISUD)), Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), Middle East and North Africa Financial Action Task Force (MENAFATF), Task Force on Money Laundering in Central Africa (GABAC).
FATF Observer Organizations
The table illustrated below depicts the internationalorganizationswho have observer status with the FATF.
What is FATF Grey List?
‘Grey List’ officially referred to as ‘Jurisdictions Under Increased Monitoring’ is prepared by Financial Action Task Force (FATF) where countries involved or at high risk of involvement in illegal activities such as terrorist financing, money laundering and other threats to the integrity of the international financial system are put under strong restrictions and close monitoring on behalf of FATF. The countries placed on grey list are committed to working with the FATF to develop action plans that will address their Anti-Money Laundering (AML) / Counter-Terrorist Financing (CFT) deficiencies. Such countries are required to find a quick paced solution to address the financial discrepancies highlighted by the FATF which are assessed directly or by the FATF-Style Regional Bodies (FSRBs).
In case of failure or non-compliance, a country may face severe punishment and restrictions for making direct or indirect investments. FATF’s restrictions due to strategic deficiencies can really hamper the economic rolling of a country. The countries in grey list also face economic sanctions from institutions like IMF and the World Bank and experience adverse effects on trade. Lack of trade opportunities, downgrading of ratings and shrinking of economy are visible disadvantages for a country for being on FATF’s grey list. This can also affect the loan opportunities from IMF and other global financing institutions. FATF updates the grey list regularly and the countries are added or removed from the list based on their action plans and performance on the identified strategic deficiencies.
According to the latest report of FATF following countries are pronounced as jurisdictions with strategic deficiencies: –
Albania, Barbados, Botswana, Burkina Faso, Cambodia, Cayman Islands, Haiti, Jamaica, Malta, Mauritius, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Philippines, Senegal, South Sudan, Syria, Uganda, Yemen and Zimbabwe.
The announcement was made by FATF President Dr. Marcus Pleyer in a virtual press conference from Paris, at the end of FATF’s October 2021 plenary. Pakistan has already completed30 out of 34 action items that were given by the FATA earlier.In simplest way, Pakistan would remainunder increased monitoring, with a commitment to resolve swiftly the identified strategic deficiencies within agreed timeframes.
FATF and Pakistan
Pakistan is not a member state of FATF rather it is a FATF Associate Member of the Asia/Pacific Group on Money Laundering (APG). Pakistan made a political commitment to work with FATF and APG to strengthen its AML and CFT regime since June 2018 and has shown significant progress on comprehensive CFT action plan.
FATF admits Pakistan’s efforts to address the strategic deficienciesof CFT action plan. Barring a few remaining deficiencies, Pakistan has shown commitment and satisfied the world about it resolve to counter the negative activities to distort the integrity of global financial system. FATF encourages Pakistan to continue further progress on remaining CFT related item which mainly involves terror financing (TF) investigations and prosecutions of senior leaders and commanders of UN designated terrorist groups.
Pakistan has addressed the deficiencies identified in 2019 APG Mutual Evaluation Report (MER) and made further progress to address the recommended actions in MER by giving commitment in June 2021 to address the strategic deficiencies in pursuant to a new action plan which primarily focuses on combating the money laundering.
Being strategically an important country in the world and in contemporary global village age, Pakistan cannot live and prosper in isolation. To address the FATF’s given roadmap on AML and CFT, Pakistan needs to continue progress by introducing, executing, and implementing the relevant laws to curb money laundering and terrorist financing which will obviously help Pakistan to come out of grey list for a better tomorrow.