Forum says country "needs to do more"
Pakistan will remain on the Financial Action Task Force grey list.
FATF President Dr Marcus Player, addressing a webinar to announce the decisions taken by the plenary in its three-day meeting period, said that the forum has decided that Pakistan “needs to do more” when it comes to fulfilling the requirements set out by the task force.
It was acknowledged Pakistan has fulfilled 21 of the 27 conditions given to it by the FATF.
Pakistan has achieved impressive progress on its FATF action plan, tweeted Federal Minister for Industries and Production Hammad Azhar. He said 21 out of 27 action items now stand cleared and the remaining six rated as partially complete. “Within a year, we progressed from 5/27 to 21/27 completed items. FATF acknowledged that any blacklisting is off the table now,” he said.
He said that instead of a current action plan, discussions remained focused on how Pakistan can be facilitated for our an upcoming second evaluation due mid next year. “I congratulate our federal and provincial teams who have worked day and night even during the pandemic to ensure this turn around,” he wrote.
The Financial Action Task Force is an inter-governmental body that combats threats to international financial system. A potential downgrade to FATF’s blacklist would have serious implications for Pakistan and here is why it matters.
Being on the blacklist means our banking system will be regarded as one with poor controls over Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) standards. The 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 our banks or simply not do business with us.
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 our ability to pay foreign debt.
Deficiencies in our banking system got us here, but this is not the first time we have been on the FATF’s grey list. We were removed from the grey list in February 2015 and placed on its white list, the one with no risk of sanctions. It put us on the blacklist again in June 2018 because of deficiencies in our AML and CFT regulations, which threaten the international financial system.