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FATF Retains Pakistan on Grey List

  • 26 Jun 2021
  • 5 min read

Why in News

The Financial Action Task Force (FATF) decided to retain Pakistan on “increased monitoring list’.

  • “Increased monitoring list” is another name for the Grey List.

Key Points

  • 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.
    • During the October-2020 Plenary, due to the Covid-19 pandemic, Pakistan was given an extension for full compliance with the 27-point action plan till February 2021.
      • It had then not fully complied with 6 of the 27 directives.
    • In February 2021, FATF acknowledged Pakistan’s significant progress in combating terrorism, however it was still to fully comply with three of the 27-point action plan.
      • The three points pertained to effective steps in terms of financial sanctions and penalties against the terror funding infrastructure and the entities involved.
  • About:
    • The FATF said Pakistan had failed to take appropriate action against UN-designated terrorists such as 26/11 accused Hafiz Saeed and JeM chief Masood Azhar. However, Pakistan has completed 26 of the 27 action items.
    • The FATF encourages Pakistan to continue to make progress to address as soon as possible the one remaining Countering Finance of Terrorism (CFT)-related item by demonstrating that Terror Financing investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups.
    • In addition, the FATF has handed down another 6-point list of tasks mainly on money laundering actions to be completed as well.
      • Pakistan is expected to amend its Money-Laundering Act, crackdown on Designated Non-Financial Businesses and Professions (DNFBPs) like real estate agencies and gemstone traders, confiscate and freeze assets of money laundering entities and monitor businesses for proliferation financing, with sanctions for non-compliance.
  • Significance:
    • In Pakistan's case, the FATF has taken cognisance of the inaction against several banned organisations involved in raising funds for terror activities and those linked to global terrorists like Jaish-e-Mohammed chief Masood Azhar and Lashkar-e-Taiba’s Hafiz Saeed and its operations chief Zaki-Ur Rahman Lakhvi.
    • On several occasions, India has also raised the involvement of elements within Pakistan in a number of terror cases, including the 26/11 Mumbai and Pulwama attacks.
    • Perpetual containment of Pakistan on the grey list of FATF would further pressurise Pakistan to take adequate measures to prevent such terrorist attacks on India from its soil.
    • Unlike the next level “blacklist”, greylisting carries no legal sanctions, but it attracts economic strictures and restricts a country’s access to international loans.
      • Pakistan’s Foreign Minister had estimated a loss of $10 billion annually to the Pakistani economy for every year Pakistan has been on the greylist.

Financial Action Task Force

  • About:
    • It is an inter-governmental body established in 1989 during the G7 Summit in Paris.
    • The FATF 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:
  • 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.
  • Sessions: The FATF Plenary is the decision making body of the FATF. It meets three times per year.

Source: IE

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