21-Oct-2022: The Financial Action Task Force (FATF) removed Pakistan from a list of countries under “increased monitoring”, also known as the “grey list”.. In its handout, the FATF stated that Pakistan made significant progress in improving its anti-money laundering and combating financing terror (AML/CFT) regime.
“Pakistan has strengthened the effectiveness of its AML/CFT regime and addressed technical deficiencies to meet the commitments of its action plans regarding strategic deficiencies that the FATF identified in June 2018 and June 2021, the latter of which was completed in advance of the deadlines, encompassing 34 action items in total.
“Pakistan is, therefore, no longer subject to the FATF’s increased monitoring process,” the handout said, adding that the country would continue to work with the Asia-Pacific Group to further improve its AML/CFT system.
What is FATF?
The Financial Action Task Force (on Money Laundering) (FATF) is an inter-governmental organization founded in 1989 to develop policies to combat money laundering and to maintain certain interest . In 2001, its mandate was expanded to terrorism financing.
The objectives of 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. FATF is a “policy-making body” that works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. FATF monitors progress in implementing its Recommendations through “peer reviews” (“mutual evaluations”) of member countries.
Since 2000, FATF has maintained the FATF blacklist (formally called the “Call for action”) and the FATF grey list (formally called the “Other monitored jurisdictions”). The blacklist has led financial institutions to shift resources and services away from the listed. This in turn has motivated domestic economic and political actors in the listed countries to pressure their governments to introduce regulations that are compliant with the FATF.
Grey List Saga
When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring.
FATF listed Pakistan among jurisdictions under increased monitoring list in June 2018 for deficiencies in its legal, financial, regulatory, investigations, prosecution, judicial and non-government sector to fight money laundering and combat terror financing considered serious threat to global financial system.
Islamabad made high-level political commitments to address these deficiencies under a 27-point action plan. But later the number of action points enhanced to 34.
The country had since been vigorously working with FATF and its affiliates to strengthen its legal and financial systems against money laundering and terror financing to meet international standards in line with 40-recommendations of the FATF.
What are the implications of being on the ‘grey list’?
Pakistan’s economy is dependent on international investors. If the country remains on FATF’s grey list, it will continue to impact its imports, exports, and remittances and limit its access to international loans.
Disadvantages of being on grey list
- It hampers the economy of a country in a negative manner where other countries start looking at the grey listed country as a risky nation for investment.
- Grey listed countries also suffer a blow to its tourism industry as people generally prefer to avoid such a nation.
- Grey listed countries find it difficult to obtain additional financing from global bodies like the IMF and other borrowers.
- The economy goes for a toss with severe problems that come with grey listing such as currency degrading, inflation and deficit in trade.
- The bond market of the country falls as international bodies downgrade the ratings of such countries.
What Benefits will Pakistan get out of grey list?
Removal from the grey list will be a big boost for Pakistan during a serious economic crisis. It will smooth foreign direct investment as investors/banks would no longer have to worry about any reputational risks associated with doing business with Pakistan while it’s on a watch list for terrorist financing.
For quality real estate news, keep visiting Landgala Blog
