Analysis: Retention of Pakistan in grey list

Reading time: 6-8 minutes.

The Financial Action Task Force (FATF), the international money laundering watchdog, is to closely scrutinize Pakistan’s progress record on curbing money flows to terrorists and terrorist organizations when it meets in Paris next week.

Three votes were required to avoid black-listing and Pakistan gathered the desired votes from its allies Malaysia, Turkey and the chair itself(China) voted to keep Pakistan out of the black list and the chances of Pakistan being in the grey list are were nil.

Background of this development:

The Asia Pacific Group on Money Laundering discovered a lot of gaps in the efforts being to curb the flow of finances to the various terrorist groups and reduce the activities of various UN-terrorist groups.

Also a stern warning was issued to the Pakistan Government because of its poor performance in the grey list and it was warned of being black listed by the global watchdog that would definitely be impacting its fragile economy.

It has been granted time till February 2020 to improve its activities otherwise high chances of Pakistan exiting the grey list. Pakistan was placed in the grey list in June 2018 by the Financial action task force for its inability to control the anti terror financing inspite of its political and diplomatic tricks to avert the action.

However after an on the site assessment by the FATF in October 2018 of the steps taken by Pakistan to curb the terror funding and money laundering, it was decided to delist Pakistan in the September 2019.

 But after the assessment it was noticed that Pakistan was able to achieve only 5 tasks out of 27 tasks given to it. However it with its allies Turkey and Malaysia and the chair China was able to gather the desired votes to avoid being blacklisted.

Pakistan had been there on the FATF grey list from 2012-2015. The presence of Pakistan in the grey list will make it difficult for the Pakistan to seek aid from the International Monetary Fund, World bank and European Union.

FATF and its functions:

The Financial Action Task Force (FATF) better known in French as Groupe d’action financiere(GAFI) an intergovernmental organisation established in 1989 as initiated on the efforts of G7 countries in order to develop policies to curb money laundering further the mandate was to combat the terror funding too.

The progress is monitored through the reviews and assessment of the member countries. The secretariat is located at Paris. It consists of 37 members and two regional organizations including the European Commission and the Gulf Cooperation Council.

The Task Force was assigned with the job of analyzing the money hoarding techniques and trends further examining the plans initiated at national or international level and further chalking out ways of combating money laundering. The Task force to further aid to its goals launched a report containing Forty Recommendations that intended to provide with a plan to fight against money laundering.

The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system

The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally.  In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.

Significance of grey list and other lists:

FATF has namely two lists which are primarily the black list and the grey list.

  • BLACK LIST

It is also known as the ‘call for action’ .Those countries form a part of Black List are that which are considered the havens for terror funding. These are often called as Non-cooperative Countries or Territories (NCCTs). The countries instead of curbing the terror funding and money laundering are supporting the activities are included in the Black List.

The List was launched in 2000 and the countries are judged as the non-cooperative in the fight against terror funding and money hoarding. The List is updated by adding or deleting entries.

  • GREY LIST  

It is commonly referred to as the “other monitored jurisdictions”. These countries are enroute to become the part of black list if they don’t combat the terror funding and money laundering and it serves as warning to the country that it might be soon included in the black list.

The consequence that might be faced by the countries including problems in getting economic sanctions and loans from international institutions such as (IMF,World Bank, ADB), further leading to complete reduction in the international trade and further boycott by the other nations.

Criticism:

Though Pakistan has not been able to combat terrorism funding and money laundering since last many years and still the infiltration from Pakistan continue but with the help of its allies Pakistan escaped Black-listing. It was only able to achieve 5 targets out of 27 and it has been given four months’ time to achieve otherwise it would become a part of the black list. The need is to blacklist it of it is unable to achieve the set standards within the set time frame.

Conclusion: The way forward

Though the FATF is not a legally empowered body international body to impose sanctions like UN Security Council or European Union. G-7 established FATF in 1989 only as an expert inter-governmental body for setting global standards on anti- money laundering (AML), countering financing of terrorism (CFT) and proliferation of Weapons of mass destruction (WMD).

The public statement to be issued by the Task Force advising its members about the counter-measures to save the financial system from the money hoarding or money supply for terrorist activities from the countries. The countries making to the Black list were North Korea and Iran however N. Korea crawled up the list in June 2016.

Though Pakistan hasn’t reached the Public statement stage but has begun to be a threat. If it fails to achieve the full action plan by February 2020 it would face serious consequences also it won’t be given any extensions.

–This article is brought to you in collaboration with Harsh Gupta from Symbiosis Law School, Noida.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s