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Pakistan on FATF grey list unless it tackles blacklisted groups

Country has implemented 26 out of 27 points

SAMAA | - Posted: Oct 21, 2021 | Last Updated: 2 months ago
SAMAA |
Posted: Oct 21, 2021 | Last Updated: 2 months ago

FILE

Pakistan to remain in the grey list of the Financial Action Task Force (FATF).

This was announced on Thursday by FATF president Dr Marcus Pleyer in a press conference.

Pakistan took serious steps to address money-laundering and terror-financing issues, FATF said.

The country even legislates to increase international cooperation, it said.

Pakistan should take steps to address strategic shortcomings.

FATF said the country should also work on expediting cases against those involved in terror financing and money-laundering.

The hybrid plenary session also reviewed other items on the agenda.

Pakistan had submitted a 100% compliance report which came under review at the FATF meeting, according to reports.

‘Progress is unprecedented in FATF history’

The development was hailed as “good news” by Energy Minister Hammad Azhar. “For the money laundering action plan: Within one cycle, four out of seven items addressed,” he tweeted. “The progress is unprecedented in FATF history.”

Referring to the terror financing action plan, he said that 26 of 27 points already completed.

“Majority of the countries believe that we have completed the action plan,” the minister said. “We are getting closer to consensus numbers in spite of ‘challenges’. Our technical stance will be vindicated soon,” he added.

Pakistan efforts for compliance

The federal government of Pakistan took a number of steps to comply with the FATF guidelines. Most of these steps revolved around curbing money laundering, a major concern for the FATF. 

Pakistan presented the compliance report to the FATF meeting held from October 19 to October 21. 

In September 2021, the government tightened the noose on who can do property deals by introducing a license system for real estate agents in PakistanReal estate is one sector where money laundering is rampant as people park their black money in plots.

Similar steps were taken to monitor lawyers, accountants and other professionals.

The government also convicted about 150 people in money laundering cases and Pakistan managed to overcome the terrorism financing issue, according to the report presented by Pakistan.

The Federal Bureau of Revenue (FBR) officials were given the power to freeze suspected bank accounts.

Two action plans for Pakistan

In June earlier this year, the FATF regional partner, the Asia Pacific Group (APG), ruled that Pakistan would continue to remain on the grey list.

Pakistan is being asked to address two action plans: The 27-item original action plan that Pakistan agreed to in June 2018, and an additional 40-item action plan that APG outlined in 2019.

In June 2021, the APG meeting emphasized compliance with both plans.

Before the October meeting, Pakistan had already satisfied 26 out of 27 items on the original plan. It had also been declared “compliant” or “largely compliant” on 35 out of 40 items from the APG action plan, according to Minister for Energy Hammad Azhar.

Pakistan has now joined a select group of countries with [a] high level of compliance,” he said in a statement tweeted in August 2021.

However, a greater level of compliance has not helped Pakistan at the FATF in the past.

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 grey list has caused huge economic losses to Pakistan. A research paper published by the Islamabad-based independent think-tank, Tabadlab, says FATF’s decision to retain Pakistan on the grey list has cost $38 billion to the country’s GDP between 2008 and 2019.

What is FATF?

The FATF is an inter-governmental body that combats threats to the international financial system.

FATF doesn’t impose any sanctions directly, but its guidelines are taken seriously by global financial institutions. 

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.

If a country is put on the FATF blacklist, it citizen sending home remittances could be subject to more scrutiny. The traders who deal in imports and exports also suffer because they have to make and receive payments with the help of international banks that may either increase the cost for that nation’s 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 in the country. Raising funds from global capital markets become difficult, which undermines the country’s ability to pay foreign debt.

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