Greylist and Blacklist : The Financial Action Task Force (FATF) decided to retain Pakistan on the “greylist” till the next review of its performance during the June plenary session.
Analysis
- Pakistan has made progress across all action plan items and has now largely addressed 21 of 27 action items but as the all-action plan deadlines had expired, the FATF kept Pakistan in the grey list.
- At the FATF Plenary, Turkey proposed that members should consider Pakistan’s good work and instead of waiting for the completion of the remaining six of the 27 parameters, a FATF on-site team should visit the country to finalize its assessment.
- On-site teams are permitted only after jurisdictions complete their Action Plans.
- However, when the proposal was placed before the 39-member Plenary, no other member seconded the move; it was not supported even by China, Malaysia and Saudi Arabia.
- The FATF finally decided to keep Pakistan in the “grey list”. Pakistan has now almost four months to comply with the recommendations as its performance will now be put to scrutiny in the next plenary in February 2021.
- The points on which Pakistan failed to deliver included inaction against charitable organizations or non-profit organizations linked to terror groups banned by the UNSC.
- With Pak continues to remain in the grey list, it has become increasingly difficult for it to get financial aid from the International Monetary Fund (IMF), World Bank, Asian Development Bank (ADB) and the European Union, exacerbating problems for the cash-strapped country.
- To avoid the blacklist, Pak has needed the support of three other countries and it has been consistently backed by China, Turkey and Malaysia to dodge the label.
- However, the country needs 12 votes out of 39 to exit the grey list and move to the white list.
- The FATF plenary decided to remove Iceland and Mongolia out of the grey list, but Iran and North Korea remain on the so-called ‘black list’.
- The greylist refers to countries that are “monitored jurisdictions” that are being reviewed for actions to stop terror financing and money laundering, while the blacklist refers to countries facing a “call to action” or severe banking strictures, sanctions and difficulties in accessing loans.
- When the FATF places a jurisdiction under increased monitoring ‘grey list’, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring.
- The current FATF grey list, by October 2020, includes the following countries: Albania, the Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda, Yemen and Zimbabwe.
- The plenary, FATF’s highest decision-making body, will next meet in February 2021 and has given Pakistan time until then to meet all the 27 parameters, especially those that pertain to imposing sanctions on terrorist outfits.
Outstanding action points
- The six outstanding action points that Pakistan has to meet mostly pertain to:
- terror financing investigations,
- demonstrating terror financing prosecutions,
- effective implementation of targeted financial sanctions against United Nations-designated terrorists, and
- federal authorities cooperating on enforcement cases.
- Pakistan has been on the FATF grey list since the June 2018 plenary.
Financial Action Task Force (FATF)
- It is an inter-governmental body established in 1989 by a Group of Seven (G-7) Summit in Paris.
- G-7 Countries: Canada, U.S., U.K., Italy, France, Germany and Japan – the seven largest advanced economies.
- Earlier it was G-8 when Russia was suspended from it because of Russia’s annexation of Crimea, a part of Ukraine.
- It helps in combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
- The FATF’s decision making body, the FATF Plenary, meets three times per year.
- The FATF monitors: the progress of its members in implementing necessary measures,
- reviews money laundering and terrorist financing techniques and counter-measures, and
- promotes the adoption and implementation of appropriate measures globally.
- In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.
- The FATF is an international policy-making body. It does not take a role in law enforcement matters, investigations or prosecutions.
- The FATF does not address at all issues related to low tax jurisdiction or tax competition.
- The FATF mandate focuses only on the fight against laundering of proceeds of crimes and the financing of terrorism.
FATF Members and Observers
- The FATF currently comprises 39 members (37 countries including China and India and 2 regional organizations – European Commission, Gulf Co-operation Council), representing most major financial centres in all parts of the globe.
- Pakistan is not a member of FATF.
- From the Indian sub-continent, India is the only member of FATF.
- FATF Observers: Indonesia.
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