Political parties claim credit as FATF admits to the completion of the 34 task actions by the country. However, Pakistan will remain on the FATF grey List until a review committee’s on-site visit before October.
But what even is FATF? what is the FATF Grey list? and why it is so important for Pakistan or any country to not be on this list?
WHAT IS THE FATF?
The Financial Action Taskforce (FATF), established in 1989 in Paris, is an intergovernmental unit that sets and examines international standards to prevent crimes that prevent financing of terrorist activities and money laundering. The FATF formulates policies that work toward making it obligatory for nations to do reforms in the desired areas.
To simplify things, FATF has three basic purposes:
- To curb money laundering
- To stop terror financing
- To counter financing of weapons of mass destruction.
WHAT IS FATF’s GREY LIST?
The greylisting of any country by FATF means that it has been placed under increased monitoring to oversee its progress on measures against terror financing and money laundering.
The countries then have to increase efforts and take measures against the above-mentioned topic to be removed from the unwanted watchlist.
The following 23 countries including Pakistan are currently on the grey list:
Albania, Barbados, Burkina Faso, Cambodia, Cayman Islands, Haiti, Jamaica, Jordan, Mali, Malta, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Philippines, Senegal, South Sudan, Syria, Turkey, Uganda, United Arab Emirates, Yemen
But there is one more undesirable list known as the FATF Black list.
Countries openly supporting terrorist activities and laundering money are put on the blacklist and are termed Non-Cooperative Countries or Territories (NCCTs). The FATF revises the grey list and the blacklist regularly, adding or deleting entries.
Pakistan’s complicated relationship with the FATF
Pakistan has had a complicated relationship with the FATF, and it is not the first time the country has found itself on the grey list.
Pakistan had been on the undesired list three times. We were first put on the list in 2008 but were removed in 2012. FATF put Pakistan on the grey list once again in 2012 but was removed in 2015. However, the third stint starting in 2018 has been the longest time period Pakistan has spent on the FATF grey list.
According to the FATF website, in 2019 “Pakistan completed 26 of the 27 action items in its 2018 action plan. The FATF encourages Pakistan to continue to make progress to address, as soon as possible, the one remaining item by continuing to demonstrate that TF investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups.”
Since 2019 Pakistan tried to fulfil the last remaining requisite and is practically eligible to be removed from the grey list. A sentence of 33 years to UN-designated terrorist Hafiz Saeed was a landmark effort by Pakistan to appease the FATF for their removal from the grey list.
However, FATF has not yet made any decisions regarding Pakistan’s removal. International news sources have confirmed that Pakistan will remain On FATF ‘Grey’ List until a FATF review committee’s on-site visit.
Minster of State for Foreign Affairs Hina Rabbani Khar said that, “It is always critical. No country would want to be in the grey list because it has its challenges, it has repercussions, it takes away investor confidence, it puts a country under the bracket that it is working under progress.”
Hina is the chair of Pakistan’s National FATF Coordination Committee.
WHY NOT BE ON THIS LIST?
The greylisting of any country by FATF can cause devastating effects on its economy in particular, especially countries like Pakistan, with fragile economies that cannot afford to be on the list for too long.
Below are some of the effects being grey listed causes:
- Donor organizations like World Bank and IMF are hesitant to provide any financial assistance
- The economy starts shrinking as investors are reluctant to invest in a country with a fragile economy
- Lack of investment causes bearish trends in the stock market
- The local currency starts losing its value, causing a rise of inflation, the trade deficit
- Trade suffers as other countries avoid engaging with grey-listed countries
- Tourism practically drops to almost none as tourists avoid visiting grey-listed countries.
- The country’s rating downgrades, impacting the bond market
How would Pakistan benefit from being unlisted from the grey list?
The most urgent and essential benefit that Pakistan could draw from the unlisting will be the sanctioning of the $3 billion economic relief program by the International Monetary Fund (IMF).
The IMF loan is a must-have due to the country’s alarmingly declining foreign reserves, falling below $10 billion, which are only sufficient for one and a half months of international payments. Economic bodies such as the World Bank and the Asian Development Bank are expected to follow the IMF.
Another benefit would be the renewal of the GSP+ status of the country by the European Union. The GSP+ results in lesser trade restrictions with the developing countries of Europe.