Global watchdog appreciates Islamabad’s significant progress on its action plan
The Financial Action Task Force has decided to keep Pakistan on its grey list, with another review scheduled for June 2021.
FATF President Dr Marcus Pleyer said the forum decided that Pakistan “needs to do more” on FATF requirements. He announced the decisions made at the three-day FATF meeting during a webinar.
The meeting took note of the significant progress Islamabad made on the entire action plan, the FATF said.
“Pakistan has made progress across all action plan items and has now largely addressed 24 of the 27 action items,” it said.
“As all action plan deadlines have expired, the FATF strongly urges Pakistan to swiftly complete its full action plan before June 2021.”
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 it 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 been on the list.
Industries and Production Minister Hammad Azhar said Pakistan has completed almost 90% of its FATF action plan. The FATF rated 24 out of 27 items as “largely addressed” and the remaining three items as “partially addressed”, he said.
“FATF has acknowledged Pakistan’s high-level political commitment since 2018 that led to significant progress,” Azhar said on Twitter.
He said the FATF members noted that Pakistan is subject to perhaps the most challenging and comprehensive action plan ever given to any country.
“We are also subject to dual evaluation processes of FATF with differing time lines,” the minister said. “I would like to commend the hard work done by dedicated teams in multiple government departments at federal and provincial tiers.”
Azhar said he would hold a press briefing in this regard at 11:30am on Friday.
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.
In February 2020, the FATF expressed concerns over “Pakistan’s failure to complete its action plan in line with the agreed timelines and in light of the Terrorist Financing risks emanating from the jurisdiction,” it said in a report.
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.