Pakistan will continue to be on the ”Grey List” of the FATF

• IAS NEXT, Lucknow
• 23, Oct 2021

Pakistan will continue to be on the ”Grey List” of the FATF as it needs to “further demonstrate” that action is being taken against UN-designated terrorists like India’s most wanted Hafiz Saeed and Masood Azhar, and groups led by them.

What next?

On the action plan of Pakistan, Paris-based FATF requires it to demonstrate terror financing investigation and prosecution of leaders and commanders of UN-designated terrorist groups and their associates.

Background:

Pakistan was put on the grey list by the Paris-based FATF in June 2018, and the country has been struggling to come out of it.

• It has now completed 26 of the 27 action items given to it in 2018.

About FATF:

1. The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 on the initiative of the G7.
2. It is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas.
3. The FATF Secretariat is housed at the OECD headquarters in Paris.

Roles and functions:

• Initially it was established to examine and develop measures to combat money laundering.
• In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.
• In April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.

Composition:

The FATF currently comprises 37 member jurisdictions and 2 regional organisations, representing most major financial centres in all parts of the globe. It also has observers and associate members.

What is a blacklist and grey list?

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.

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.

Considered in the grey list may face:

1. Economic sanctions from IMF, World Bank, ADB.
2. Problem in getting loans from IMF, World Bank, ADB and other countries.
3. Reduction in international trade.
4. International boycott.