from Pakistan

FATF meets to decide on Pakistan’s case Monday

The Financial Action Task Force will hold a three-day virtual meeting on Monday to decide whether Pakistan would stay on its Grey List.

Pakistan has forwarded a report of its progress on
regulations to curb money laundering and terrorism financing to the global
financial watchdog.

The country has implemented 21 out of 27 regulations,
officials at the Finance Ministry said. The rest of the points have been
implemented up to 70%, they added.

Pakistan has made amendments to its FATF law, seized assets
of banned organisations and taken steps to stop members of these organisations
from operating. It has also made progress on 40 other points apart from the 27
in the FATF action plan.

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).

Explainer: Pakistan to stay on FATF Grey List till Feb 2021

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

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.