Islamabad: Pakistan is to be placed on the ‘grey list’ of the global money-laundering watchdog Financial Action Task Force (FATF) in June 2018 after discussions, the Pakistan Foreign Office confirmed on Wednesday, ending a week-long confusion.

Foreign Office spokesman Dr Mohammad Faisal revealed that Pakistan is set to be added to the watchlist of countries that do not meet the criteria of money laundering and terror financing. The decision was taken at the FATF plenary held in Paris last week.

“Pakistan will be assigned to the ‘grey list’ in June, once an Action Plan has been mutually negotiated” the spokesman said at a weekly news briefing. However, there was “currently no chance of being placed on the blacklist” he said.

Pakistan will cooperate with FATF in every possible way, Dr Faisal maintained, as FATF has asked Pakistan to take additional steps to curtail money laundering and terror financing.

According to the Foreign Office, Pakistan has already taken steps to remove deficiencies in the Anti-Money Laundering and Countering of Terrorist Financing (AML/CFT) framework of the nation, and measures include establishment of the Financial Monitoring Unit and the presidential ordinance to amend the anti-terror legislation in order to include all UN-listed individuals and groups in the national listings of proscribed outfits and persons.

Pakistan is currently preparing an action plan to eliminate terrorist financing, and all matters related to FATF will be dealt with by the finance ministry, Dr Faisal said.

Earlier this week there was confusion on whether Pakistan has been put on a ‘grey list’ by the FATF as a statement by the global watchdog following the Paris meeting did not mention Pakistan.

The 37-nation FATF plenary held its first meeting on Pakistan on February 20 where China, Turkey and Saudi Arabia opposed the US-led move to place Pakistan on the watchlist. But the US pushed for a second discussion on Pakistan, held on February 22, and managed to convince Saudi Arabia to withdraw its support for Pakistan.

What is FATF?

The Financial Action Task Force is a standard-setter in the fight against terrorist financing and money laundering. The inter-governmental body was established in 1989, by a G7 Summit, in Paris to combat money laundering, terrorist financing and other illegal activities related to the international financial system.

The global money-laundering watchdog monitors financial transactions of countries worldwide, reviewing if they have taken the required steps against curtailing the flow of funds to blacklisted organisations ie mafias, terrorist outfits, banned groups. Based on these facts and reviewing the situation, FATF releases a list of countries and sorts them according to their performance.

What is the Grey List and what is its impact?

FATF’s grey list includes countries that are not doing enough to fight money laundering and terrorist financing. The countries on the list would also face restrictions and limitations on trade and finance transferring.

Pakistan was on this list previously for three years between 2012 and 2015. The watchdog recognised Pakistan’s efforts and removed it from the grey list in 2015. However, following the tensions between Pakistan and the US, Pakistan is to be back on the list.

Experts say that there are no direct legal implications of being placed on the FATF watchlist, but it brings extra scrutiny from regulators and financial institutions, making it tough to access funds from international markets. However, the advisor to the Prime Minister on Finance has claimed that re-inclusion on the list would have no substantial effect on the economy.

Countries currently on the list

The list now features North Korea, Ethiopia, Iran, Iraq, Syria, Serbia, Sri Lanka, Yemen, Trinidad and Tabago, Vanuatu and Tunisia, while Bosnia and Herzegovina has been moved to the white list.