BLACK OR GREY: WHAT NEXT FOR PAKISTAN AT FATF
14, Jun 2019
Prelims level : International Economics Mains level : GS3- Indian Economy and Issues Relating to Planning, Mobilization of Resources, Growth, Development and Employment
Why in News:
- Pakistan has been under the FATF’s scanner, when it was put on the greylist for terror financing and money laundering risks, after an assessment of its financial system and law enforcement mechanisms.
- The FATF, an inter-governmental body that is now in its 30th year, works to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
- The June 16-21 Plenary could take up a proposal to downgrade Pakistan to the blacklist on terrorist financing from its current “greylisted” status.
- FATF and its partners such as the Asia Pacific Group (APG) review Pakistan’s processes, systems, and weaknesses on the basis of a standard matrix for anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.
- Recently Pakistan gave a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime, and to address its strategic counter-terrorism financing-related deficiencies. Based on this commitment, Pakistan and the FATF agreed on the monitoring of 27 indicators under a 10-point action plan, with deadlines.
- The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 on the initiative of the G7. It is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas. The FATF Secretariat is housed at the OECD headquarters in Paris.
- The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
- 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.
What is blacklist and grey list?
- FATF maintains two different lists of countries: those that have deficiencies in their AML/CTF regimes, but they commit to an action plan to address these loopholes, and those that do not end up doing enough. The former is commonly known as grey list and latter as blacklist. Once a country is blacklisted, FATF calls on other countries to apply enhanced due diligence and counter measures, increasing the cost of doing business with the country and in some cases severing it altogether. As of now there are only two countries in the blacklist — Iran and North Korea — and seven on the grey list, including Pakistan, Sri Lanka, Syria and Yemen.