FATF retains Pakistan in Grey List

• 07 Mar 2022

For Prelims: Financial Action Task Force.

For Mains: Money Laundering, India and its neighbourhood, Important international institutions.

Why in News?

The Financial Action Task Force (FATF) has retained Pakistan on its ‘greylist’ or 'increased monitoring list’. The FATF included the United Arab Emirates (UAE), with which India signed a free trade agreement in February 2021.

• There are 17 countries on the grey list of the FATF.
• Zimbabwe has been excluded from the list after a review found it compliant on all parameters.

What are the Key Points?

• About:
  • FATF decided against existing Pakistan from the category despite the country meeting 32 out of 34 action points.
  • It noted that Pakistan had completed 26 of the 27 action items in its 2018 action plan of the FATF and of the seven action items of the 2021 action plan of the FATF’s Asia Pacific Group on Money Laundering (APG).
  • In response to additional deficiencies later identified in Pakistan’s 2019 APG Mutual Evaluation Report in June 2021, Pakistan provided further high-level commitment to address these strategic deficiencies pursuant to a new action plan that primarily focuses on combating money laundering.
    • The country had two concurrent action plans with a total of 34 action points, of which 30 had either been fully or largely addressed to curb money laundering and terror financing.
  • The FATF encouraged Pakistan to continue making progress to address, as soon as possible, the one remaining item by continuing to demonstrate that terror financing investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups.
    • Since June 2018 - when Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its anti-money laundering/combating the financing of terrorism (AML/CFT) regime and to address its strategic counter–terrorist financing–related deficiencies — its continued political commitment had led to significant progress across a comprehensive CFT action plan.
• Background:
  • The FATF had issued the 27-point action plan after placing Pakistan on the ‘Grey List’ in June 2018. The action plan pertains to curbing money laundering and terror financing.
  • Pakistan was first put on the list in 2008, removed in 2009 and then again remained under increased monitoring from 2012 to 2015.
  • Pakistan's inclusion in the grey list has adversely impacted that country's prospects of obtaining financial assistance from world bodies such as the International Monetary Fund, World Bank, and Asia Development Bank.

What is the Financial Action Task Force?

• About:
  • An inter-governmental body established in 1989 during the G7 Summit in Paris.
  • Assesses the strength of a country’s anti-money laundering and anti-terror financing frameworks, however it does not go by individual cases.
• Objectives:
  • 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.
• Headquarters:
  • Its Secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris.
• Member Countries:
  • The FATF currently has 39 members including two regional organisations - the European Commission and Gulf Cooperation Council. India is a member of the FATF.
• Lists under FATF:
  • Grey List:
    • Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list.
    • This inclusion 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, adding or deleting entries.
    • Currently, Iran and Democratic People's Republic of Korea (DPRK) are under High-risk Jurisdiction or black list.
• Sessions:
  • The FATF Plenary is the decision making body of the FATF. It meets three times per year.

Source: TH