Not Blacklisted Yet, Pakistan Gets Final Reprieve From FATF, To Remain 'Greylisted' For 4 Months

New Delhi: International money laundering and terror funding watchdog, Financial Action Task Force, has given a final reprieve to Pakistan by retaining it on the grey list and giving it four more months to implement reforms to prevent money laundering and terror.

In a public statement released at the end of the plenary session on Friday, FATF “strongly urge(d) Pakistan to swiftly complete its full action plan by February 2020”.

If there is no “significant and sustainable progress” across the “full range of its action plan” by February 2020, then the watchdog warned that actions could include directions to member nations to advice their financial institutions to “give special attention to business relations and transactions with Pakistan”. 

At a press briefing, FATF president Xiangmin Liu said that Pakistan “has not made enough progress”.

“Pakistan needs to do more and it needs to do it faster,” he said.

Also read: FATF Arm Finds 'Critical Gaps' in Pakistan's Actions Against Terror Groups 

An FATF ‘black list’ would isolate Pakistan’s financial network from the rest of the international system and effectively strangle its struggling economy.

The statement released in Paris at noon noted that all the deadlines committed by Pakistan under the 'Action Plan' submitted last year have expired. “To date, Pakistan has only largely addressed five of 27 action items, with varying levels of progress made on the rest of the action plan,” he said. 

While there had been some improvements recently, FATF expressed “serious concerns” that there was an “overall lack of progress” by Pakistan in addressing its terror financing risks. The remaining deficiencies cited by the group were “(demonstration of) sufficient understanding of Pakistan’s transnational terror funding risks, and more broadly, Pakistan’s failure to complete its action plan in line with the agreed timelines and in light of the terror-funding risks emanating from the jurisdiction”.

According to the FATF statement, Pakistan had reiterated its “political commitment to completing its action plan and implementing AML/CFT reforms”.

This was also echoed in the statement issued by the Pakistan finance ministry in Islambad. “The Plenary meeting decided to maintain status quo on the FATF action plan,” they added. 

Pakistan’s minister of economic affairs division, Hammad Azhar had led the delegation in Paris.

In June 2018, FATF had placed Pakistan on the ‘grey list’, which is the colloquial term for countries whose domestic laws and its implementation are considered too weak to tackle the challenges of money laundering and terror financing.

In May this year, the FATF plenary “strongly” urged Pakistan to complete implementing its action plan by October 2019. “Otherwise, the FATF will decide the next step at that time for insufficient progress,” it said after the plenary ended on June 21.

The FATF has again met for a plenary session at Paris from October 13 to 18.

Before the plenary, Pakistan’s mutual evaluation by the Asia Pacific Group, the regional affiliate of FATF, was adopted in September 12 and then made public on October 2.

The ‘report card’ had found that there were critical gaps in Pakistan’s efforts to curb flow of funds and restrict activities of proscribed terror groups like Jamaat-ud-Dawa and Lashkar-e-Taiba. It had also disputed Pakistan’s self-evaluation of facing only ‘medium’ risks of money laundering and terrorism financing. Following the report, APG had listed Pakistan for an “enhanced follow-up”.

The APG report on Pakistan was also presented at the FATF plenary, which also discussed its compliance with FATF’s 40 recommendations. Pakistan has been 100% compliant with only one recommendation, “largely compliant” on nine and “partially compliant on 25 others”.  There were nine recommendations in which there was no progress.

There has been no public response from India so far. However, news agency ANI has quoted Indian government sources as stating that it was “highly probable” that Pakistan could join Iran and North Korea on the ‘black list’.

Sources: By making this decision public, Financial Action Task Force(FATF) has given notice to global financial institutions that they need to prepare to red flag the jurisdiction and ready their systems for the eventuality in February 2020. https://t.co/VIEbtuhoJJ

— ANI (@ANI) October 18, 2019

India has been pushing for Pakistan to be punished for not taking enough steps to take out proscribed groups and sanctioned individuals like Hafiz Saeed from circulation.

In fact, FATF has specifically asked Pakistan to demonstrate “effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services”.

However, Pakistan has been pointing fingers at India for having “politicised” the FATF process. During his speech at UN General Assembly, Pakistan Prime Minister Imran Khan claimed that it was India’s push to ‘blacklist’ Pakistan which would “bankrupt” the country, which made him realise that New Delhi was not interested in any talks.

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