The Financial Action Task Force (FATF) has decided to keep Pakistan on its grey list. Foreign Minister Shah Mehmood Qureshi says it is a disappointing decision. Image Credit: FATF

Islamabad: The Financial Action Task Force (FATF) has decided to keep Pakistan on its ‘grey list’ until February 2021 despite complying with 21 out of 27 action plans.

FATF President Marcus Pleyer announced the decision in a press briefing held after FATF’s virtual three-day (Oct 21-23) plenary session that concluded today.

“Pakistan has made progress across all action plan items and has now largely addressed 21 of the 27 action items. As all action plan deadlines have expired, the FATF strongly urges Pakistan to swiftly complete its full action plan by February 2021” the official statement said.

“Even though Pakistan’s government has made reforms and completed 21 of the 27 items but the country needs to do more to complete 6 outstanding items” Pleyer stressed. After successfully complying with all the action plans, the FATF team will visit Pakistan to verify that measures are implemented effectively on the ground – pre-requisite to exit the grey list.

The global watchdog reviewed Pakistan’s progress on the 27-point action plan for addressing anti-money laundering and terror financing in its plenary session that started on October 21.

Impressive progress

FATF report noted that Pakistan’s continued political commitment has led to progress in a number of areas in its action plan; taking action to identify and sanction illegal Money or value transfer services (MVTS), improving international cooperation in terrorist financing cases, passing amendments to the Anti-Terrorism Act (ATA) to increase the sanctioning authority, financial institutions implementing targeted financial sanctions and applying sanctions for Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) violations, and controlling facilities and services owned or controlled by designated persons and entities.

Following the decision, Minister for Industries Hammad Azhar said that Pakistan had “achieved impressive progress” as 21 out of 27 action items now stand cleared” while the remaining 6 have been rated as partially completed. “Within a year, we progressed from 5/27 to 21/27 completed items. FATF acknowledged that any blacklisting is off the table now.”

Disappointing decision

Foreign Minister Shah Mehmood Qureshi earlier said that Pakistan has made robust progress to meet FATF recommendations and the parliament has taken “concrete steps” to address deficiencies in its anti-money laundering and counter-terror financing regimes which the international community has also acknowledged.

Most Pakistanis believe that FATF decision to place Pakistan on the grey list is more of a political issue than financial. “FATF is politically driven forum to exert pressure on Pakistan to achieve desired objectives. The decision has highly disappointed Pakistanis looking forward for a positive outcome even after meeting most of the conditions” said Sheraz Khan, an Islamabad-based businessman.

Pakistani officials have also alleged India’s political manipulation of the forum against Pakistan in an effort to not only keep it in FATF grey list but also to even push it to the blacklisted countries. Pakistan’s FM Qureshi earlier expressed hope that following Pakistan’s implementation of most of the FATF recommendations, India’s plans to “push Pakistan into the blacklist will fail.”

FATF conditions

In its official statement, the global watchdog said that Pakistan should continue to work on implementing its action plan by demonstrating that:

1. Law enforcement agencies (LEAs) are identifying and investigating the widest range of terrorist financing (TF) activity, investigations and prosecutions

2. TF prosecutions result in effective, proportionate and dissuasive sanctions.

3. Effective implementation of targeted financial sanctions against all 1267 and 1373 designated terrorists and those acting for or on their behalf, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services.

4. Enforcement against targeted financial sanctions (TFS) violations, including in relation to NPOs, of administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases.

When and why was Pakistan placed on the grey list?

Pakistan was placed in June 2018 on the FATF’s grey list that comprises of countries under increased monitoring by the watchdog due to flaws in their financial regulations. In February 2020, Pakistan received a four-month grace period to complete its 27-point action plan against money laundering and terror financing (ML&TF).

In the FATF’s 2019 Mutual Evaluation Report, Pakistan was compliant on one, non-compliant on four, partially compliant on 26 and largely compliant on nine recommendations. During the last two years, Pakistan amended at least 15 laws and implemented various legal and administrative actions to remove the faults and address FATF concerns as per international standards.