It's on the grey list because it has a 'significant' risk of money laundering, terrorist financing
Pakistan has frozen the bank accounts and assets of banned outfits, a delegation of the Pakistani government told the Asia Pacific Group (APG) of the Financial Action Task Force in Sydney on Tuesday.
Based out of Paris, the FATF is an inter-governmental body that combats money laundering, terrorist financing and threats to the international financial system. It put Pakistan on its grey list in June 2017 because of deficiencies in the country’s Anti-Money Laundering (AML) and Countering of Terrorist Financing (CTF) regulations.
Pakistan and the APG, which Pakistan is a member of, began the first round of dialogue in Sydney where government officials briefed the latter about actions it has taken against banned outfits involved in terrorist financing.
In the Sydney briefing, Pakistani officials told the APG that they have frozen the accounts and assets of the Jamaat ud Dawa and its welfare wing the Falah-e-Insaniat Foundation. Other banned outfits whose assets were seized include the Da’ish, Taliban, Al-Qaeda, Lashkar-e-Taiba, Jaish-e-Mohammad and Haqqani Network, according to the briefing.
Last October, an FATF delegation visited Pakistan for two weeks to assess the country’s progress on countering money laundering and financing of terrorism. The FATF gave the government an action plan to exit from the grey list. Later in December, Pakistan prepared a Terrorism Financing Risk Assessment report, which includes drug trafficking, kidnapping for ransom, external funding, extortion, and robberies among primary sources of terrorism financing in Pakistan.
The report will be presented to the APG in the ongoing Sydney dialogue, which is an extension of that process and will end on January 10. The APG will then present Pakistan’s case before the FATF in February.
Pakistan is among 83 countries with a risk score of 5.0 or above. These are countries that could be loosely classified as having a significant risk of money laundering and terrorist financing, according to the Basel AML Report 2018, an independent annual ranking that assesses the risk of money laundering and terrorist financing in 129 countries.
“Money laundering and terrorist financing continue to cripple economies, distort international finances and harm citizens around the globe,” says the report, which forms its global index based on the FATF’s country evaluation reports. It estimates that the amount of money laundered worldwide ranges from $500 billion to a staggering $1 trillion.
Pakistan has criminalised both money laundering and terrorist financing but has not been able to enforce these laws effectively. Being on the grey list doesn’t come with any sanctions, but if we remain on this list, we face the risk of being put on the black list. This is where it gets problematic.
Being on the black list means our banking system will be regarded as one with poor controls over AML and CFT standards — forget bringing PayPal to Pakistan, expatriates will find it difficult to send remittances and traders’ cost of business will increase because our banks will face higher scrutiny in international payments and foreign banks might not even do business with Pakistani banks. The government, too, will struggle to raise funds from international markets if we are placed on the black list.
Pakistan has been on and off the grey list in the past. The last time we were removed from the grey list was in February 2015. If the ongoing consultations between the FATF and the Pakistani government are successful, we will be taken off the grey list and placed on the white list.