Pakistan to remain in the Greylist of FATF

Context

Recently the Financial Action Task Force (FATF) decided to keep Pakistan on the “greylist” until the next review of its compliance to the recommendations in February next year. The decision of the FATF was taken on the ground that Pakistan did not comply with the 27 parameters set by the FATF and complied with only 21 parameters.

Highlights

• At the recent plenary session, the FATF acknowledged that Pakistan has made progress across all action plan items and has addressed 21 of 27 action items.
• By keeping Pakistan on the ‘Grey List’, the FATF strongly urged Pakistan to swiftly complete its full action plan by February 2021.
• The decision was taken after a three-day virtual plenary session.
• The points on which Pakistan failed to deliver includes:
  • Its lack of action against the non-profit organisations linked to the terror groups banned by the UN Security Council.
  • Delays in the prosecution of banned individuals and entities such as Lashkar-e-Taiba (LeT) chief Hafiz Saeed and LeT operations chief, Zaki Ur Rahman Lakhvi, as well as Jaish-e- Mohammad chief Masood Azhar.
  • Pakistan was also found to be non-compliant in cracking down on terror financing through narcotics and smuggling of mining products including precious stones.
  • The FATF process also expressed concern about 4,000 names which were on Pakistan’s Schedule-IV list under the Anti-Terrorism Act until January, but in September 2020, went missing.
• In June 2018, the FATF issued a 27-point action plan after putting Pakistan on the 'Grey List'.
• The Action Plan is aimed at curbing money laundering and terror funding.
• The task force’s International Cooperation Review Group (ICRG) recently noted that Pakistan had complied with 21 points out of 27 points.
• Since 2007, the ICRG has analysed high-risk jurisdictions and proposed specific action to address the issues of money laundering, terror financing and risks emanating from them.
• The FATF listing makes it extremely difficult for Pakistan to obtain financial aid from the International Monetary Fund (IMF), the World Bank and the European Union.
• Pakistan has recently passed 3 crucial legislation after it was downgraded under the FATF list in 2019:
  •  Anti-terrorism act (Amendment) Bill 2020
  • Anti-money laundering (Amendment) Bill
  • Islamabad capital territory Waqf properties bill

About Financial Action Task Force (FATF)

• It is the watchdog of global money laundering and terrorist financing.
• The Inter-Governmental Body sets out international standards that aims to avoid these illegal activities and the threat they bring to society.
• As a policy-making body, the FATF works to create the political will needed to introduce national legislative and regulatory changes in these areas.
• The FATF has established the FATF Guidelines to ensure a coordinated global response for the prevention of organised crime, corruption and terrorism.
• They help the authorities to find money from criminals associated with illegal drugs, trafficking in human beings and other crimes.
• The FATF is also working to stop financing weapons of mass destruction.

• Lists under FATF includes:
  • Grey List: Countries that are considered safe havens for supporting terror funding and money laundering are put in the FATF grey list. This serves as a warning to the country that it may enter the blacklist.
  • Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly by adding or deleting entries.
  • As of this year, there are only two countries: North Korea and Iran are on the FATF's black list.

Note: India argues that Pakistan still continues to provide safe havens for terrorist entities and individuals and has also not yet taken any action against several terrorist entities and individuals including those proscribed by the UNSC, such as Masood Azhar, Dawood I.