Says it resulted from major reforms in federal, provincial laws
Pakistan has achieved compliant rating for 31 out of 40 recommendations of the Financial Action Task Force, Energy Minister Hammad Azhar said Friday.
This was a parallel scrutiny undertaken at FATF besides Pakistan’s current action plan, Azhar said on Twitter.
“Upgrade of 20 criteria in less than two years is unprecedented in FATF history for any country,” he said.
The minister said that this outcome was a result of major legal reforms in 14 federal and three provincial laws with corresponding regulations.
“It is also due to the untiring efforts of the entire FATF team comprising of 20 ministries plus organizations,” he said.
Pakistan will be staying on the FATF grey list till June 2021, before the next plenary meeting of the global financial watchdog.
Pakistan’s stay on the grey list has cost it nearly $38 billion, according to a local thinktank, Tabadlab. The losses were driven by cuts in investment, exports, trade and spending.
The FATF put Pakistan on its grey list in 2008 only to be removed the same year. The country was again put on the list in 2012 and stayed there until 2015.
The FATF once again placed Pakistan on the list in 2018. It has since not been struck off.
The FATF is an inter-governmental body that combats threats to international financial system. A potential downgrade to the FATF blacklist has serious implications for Pakistan.
Being on the blacklist means the country’s banking system will be regarded as one with poor controls over Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT).
FATF doesn’t impose any sanctions directly, but its guidelines are taken seriously by global financial institutions. This means overseas Pakistanis who send remittances to Pakistan will be subject to more scrutiny. The traders who deal in imports and exports will suffer because they have to make and receive payments with the help of international banks that may either increase the cost for Pakistani banks or simply not do business with them.
The implications for the economy as a whole can be far more serious. Being placed on FATF’s blacklist can affect capital inflows and lower investment to Pakistan, thus hurting the ongoing IMF programme. Raising funds from global capital markets will be difficult, which will undermine the country’s ability to pay foreign debt.
The global watchdog for illicit financial activities had put Pakistan on its grey list in June 2018 because of weaknesses in the country’s AML and CFT regimes.
The grey list refers to countries or jurisdictions under increased monitoring because of strategic AML and CFT deficiencies. After being placed on the grey list, Pakistan had developed an action plan with the FATF to address those deficiencies, but fell short of targets.
The deadline was initially June 2020. But it was first extended to September 2020 and then to February 2021. It has now been extended until June 2021.