FATF BLACK LISTS PAKISTAN
What’s in news?
Global Financial Action Task Force’s (FATF) regional sub-group APG (Asia-Pacific Group) has blacklisted Pakistan for non-compliance of anti-money laundering and combating terror financing efforts.
Pakistan was placed on the grey list by the FATF in June last year for failing to curb anti-terror financing.
- The Asia-Pacific Group, one of the nine regional affiliates of FATF, has placed Pakistan in the enhanced expedited follow-up list (also known as the blacklist) for its failure to meet its standards.
- Of total 40 parameters set by the regional grouping, Pakistan failed on around 36, while it passed on only one of the total 11 ‘effectiveness’ parameters.
- Pakistan had submitted its compliance report comprising its 27-point action plan to the Financial Action Task Force (FATF).
- The report could not pass the scrutiny of the APG, which found Islamabad lacking on several fronts.
What Pakistan agreed to do?
- In June 2018, Pakistan gave a high-level political commitment to work with the FATF and APG to strengthen its (anti-money laundering) AML/(combating the financing of terrorism) CFT regime, and to address its strategic counter-terrorism financing-related deficiencies.
- Pakistan and the FATF then agreed on the monitoring of 27 indicators under a 10-point action plan, with specific deadlines.
- The understanding was that the successful implementation of the action plan, and its physical verification by the APG, would lead the FATF to move Pakistan out of the greylist.
- However, failure to comply by Pakistan could result in its blacklisting by September 2019.
What happens now?
- For Pakistan to still be moved out of the greylist would require the votes of at least 15 of the FATF’s 36 voting members.
- At least three votes would be needed to block a move to blacklist Pakistan.
- The 36 countries include mostly developed Western nations, but also China, Hong Kong (China), Malaysia, and Turkey.
- Pakistan will likely make a diplomatic push to thwart blacklisting.
- It claims it has done enough on the action plan, banning Hafiz Saeed’s Jamaat-ud-Dawa and Masood Azhar’s Jaish-e-Mohammed, and taking over their properties.
- Pakistan’s $6 billion loan agreement with the International Monetary Fund (IMF) could be threatened.
- The IMF has asked Pakistan to show commitment against money laundering and terror financing.
- Pakistan is in a precarious financial sitation. It faces an estimated annual loss of $10 billion if it stays in the greylist; if blacklisted, its already fragile economy will be dealt a powerful blow.
- The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 on the initiative of the G7.
- It “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”.
Asia-Pacific Group on Money Laundering (APG):
- FATF Asia-Pacific Group is one of the regional affiliates of the Financial Action Task Force.
- The Asia-Pacific Group on Money Laundering works to ensure that all the countries adopt and implement the anti-money laundering and counter-terrorist financing standards that are set out in the FATF’s 40 Recommendations and Eight Special Recommendations.
- APG assists countries in implementing laws to deal with crime, assistance, punishment, investigations; provides guidance in setting proper reporting systems and helps in establishing financial intelligence units.
- At present, there are 41 members of APG. Of these, 11 countries are also the members of the head FATF – India, China, Australia, Canada, Hong Kong, Japan, Korea, Malaysia, New Zealand Singapore and the United States.
India Vs Pakistan at FATF:
- India is a voting member of both the FATF and the APG, and co-chair of the Joint Group, where it is represented by the Director General of India’s Financial Intelligence Unit (FIU). Pakistan had asked for India’s removal from the group, citing bias and motivated action, but that demand was rejected.
- India was not part of the group that had moved the resolution to greylist Pakistan last year in Paris. The movers were the US, UK, France, and Germany. China did not oppose the move then.
What is blacklist and greylist?
FATF maintains two different lists of countries:
- Those that have deficiencies in their AML/CTF regimes, but they commit to an action plan to address these loopholes, and those that do not end up doing enough. The former is commonly known as grey list and later as blacklist.
- Once a 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.
- As of now there are only two countries in the blacklist — Iran and North Korea — and seven on the grey list, including Pakistan, Sri Lanka, Syria and Yemen.
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