In the plenary sessions of the Financial Action Task Force (FATF) on October 21, 2021, Pakistan has been retained in the grey list till the next plenary session of the FATF on February 2022. Pakistan was inserted in the grey list on June 2018.
FATF assesses any participating or non-participating country supporting terror funding and money laundering activities, when it is placed on the blacklist. Presently Iran and North Korea are on the blacklist. Blacklisted countries face severe economic sanctions from international financial institutions, as a result of which their international trade suffers and they face international economic isolation. Countries are placed in the grey list if they lack the financial infrastructure to counter money laundering or terror financing and are required to take actions to remedy this within a specific time frame. Countries in the grey list face the threat of being black listed in case of inadequate action. Presently, there are twenty-three nations including Turkey, Mali, Jordan and Pakistan on the grey list.[i]
FATF comprises of 37 member jurisdictions and two regional organisations, which includes European Commission and the Gulf Cooperation Council.[ii] Dr. Marcus Pleyer of Germany assumed the position of President of the FATF on 1 July 2020. He succeeded Xiangmin Liu of the People’s Republic of China.[iii]
Along with the FATF, there is the Asia/Pacific Group on Money Laundering (APG). It is an inter-governmental organisation, consisting of 41 member jurisdictions. The objective of the APG is to ensure that individual members effectively implement the international standards against money laundering, terrorist financing and proliferation financing related to weapons of mass destruction.[iv]
As per Dr. Pleyer, there are two concurrent action plans infront of Pakistan. One is a 27 action points that was agreed on June 2018 by the FATF and a 7 action points that was agreed on June 2021 by the APG. Pakistan has been able to implement 26 out of the 27 action points and 4 out of the 7 action points. Though, Pakistan has made ‘good progress’ on the June 2021 action points, it has not implemented the remaining condition of the June 2018 plan, which remains crucial.[v] Pakistan needs to ‘demonstrate that investigations and prosecutions are being pursued against the senior leadership of UN designated terror groups”, which it has not complied with.[vi] He further stated that the decision of retaining Pakistan on the grey list was taken by consensus of the 39 members of the FATF jurisdictions.[vii]
As per a statement issued by the FATF, Pakistan should continue to work to address its other strategically important anti-money laundering and countering financing of terrorism (AML/CFT) deficiencies. These are: (1) providing evidence that it actively seeks to enhance the impact of sanctions beyond its jurisdiction by nominating additional individuals and entities for designation at the United Nations (UN); and (2) demonstrating an increase in money laundering investigations and prosecutions and that proceeds of crime continue to be restrained and confiscated in line with Pakistan’s risk profile, including working with foreign counterparts to trace, freeze, and confiscate assets.[viii]
In the previous sessions of FATF, it was pointed out that ‘Pakistani authorities will have to ensure international cooperation-based investigations and convictions against banned organisations, list of which has been provided by FATF to Pakistan and proscribed persons’[ix], which Pakistan has not yet been able to comply. Pakistan has failed to demonstrate to take any effective action against UN designated terrorist organisations and individuals and their associates not only in terms of financial sanctions or seizure of assets, but also in conducting proper investigation, prosecution and convictions against such organisations and individuals.
Pakistan continues to lack a proper framework to conduct risk-based supervision or gathering any feedback outside formal consultation mechanisms within non-financial businesses and professions that are usually involved in money laundering or terrorism funding.The present government under Prime Minister Imran Khan and that of all political parties having representation in the legislative assembly has not shown any interest to initiate a public debate to design any comprehensive system supported by implementation in true letter and spirit. It is evident that the Pakistani parliament along with the executive, judiciary, and the military establishment has mishandled crucial challenges rising out of terrorism and terror financing on ad-hoc basis to buy more time, rather than going for fundamental structural reforms. Till such steps are not adopted, Pakistan will remain to be seen as a sympathizer for terrorist groups and individuals.
* Dr. Dhrubajyoti Bhattacharjee is a research fellow at the Indian Council of World Affairs.
Disclaimer: Views are personal
[i]FATF nations, Full member nations, Observer nations, Call for action nations (Blacklisted nations), Other monitored jurisdictions (grey listed nations), https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/increased-monitoring-october-2021.html#pakistanaccessed on October 22, 2021
[ii]FATF Members and Observers, https://www.fatf-gafi.org/about/membersandobservers/ as accessed on October 22, 2021
[iv]Asia/Pacific Group on Money Laundering, http://www.apgml.org/default.aspx accessed on October 22, 2021
[viii]“Jurisdictions under Increased Monitoring - October 2021”, FATF, https://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/increased-monitoring-october-2021.html#pakistan as accessed on October 25, 2021
[ix]Mehtab Haider, “Pakistan must comply with 13 points to come out of FATF grey list”, The News International, March 16, 2020, https://www.thenews.com.pk/print/629673-pakistan-must-comply-with-13-points-to-come-out-of-fatf-grey-list as accessed on October 25, 2021