Home > DNS

Blog / 18 Jun 2019

(Daily News Scan - DNS English) Financial Action Task Force (FATF)

image


(Daily News Scan - DNS English) Financial Action Task Force (FATF)


Important Points:

Pakistan was placed in FATF’s grey list for terror financing and money laundering risks. It was done after an assessment of its financial system and law enforcement mechanism in June last year. FATF is going to hold its Plenary and Working Group Meeting in Orlando from Sunday i.e. 16 June.

FATF i.e. Financial Action Task Force is an inter-governmental body that was established by G-7 summit held in Paris in 1989. G-7 is a group consisting of seven countries with the world’s largest developed economies. FATF is a policy making body which promotes and recommends effective implementation of legal, regulatory and operational measures for fighting against issues like money laundering, terrorist financing and threats related to international financial system.

The FATF has 38 members out of which 36 are member jurisdiction and 2 are regional organisations. It also has associate members and Observer Organisations.

Money laundering is a process of generating money by criminal and corrupt activities. If a country fails to follow the recommendations then FATF places them into black list or grey list. Black is for the countries those who are non-cooperative in the fight against money laundering and terrorist financing. The grey list is a warning given to a country before placing it in the blacklist. Pakistan was also on FATF’s grey list in the year 2008 and from 2012 to 2015.

The Asia Pacific Group (APG), an associate member of FATF had informed Pakistan that 27 prescribed action plans out of which on 18 plans its actions were unsatisfactory regarding the prescribed terror outfits. APG is an intergovernmental organisation consisting of 41 members jurisdiction that focuses on effective implementation of international standard against terror financing and money laundering. It demanded strict actionable steps by Pakistan against various foundations and persons affiliated with the Taliban. Further they wanted some concrete plans and outcomes to fight against money laundering and terror financing. FATF has mentioned conflicting situations and poor partnership between stakeholders. ASIA Pacific Group (APG) identified lack of cooperation in law enforcement agencies at various levels of Pakistan government.

Pakistan has claimed that it has made a lot of efforts on the action plans, banning terrorist organisations and taking over their properties. Pakistan should prevent the raising and moving of funds, identifying movable and immovable asset. Moreover it should prohibit access to funds and financial services.

FATF wants Pakistan to show effective implementation of targeted financial sanctions against all terrorist mentioned under UN Security Council Resolutions 1267 and 1373. The Resolution1267 deals with individuals and entities associated with Taliban whereas 1373 is a counter terrorism strategy adopted after September 11 attack.

India is among the 11 members of APG and all of them are members of FATF. India wanted Pakistan to be on the blacklist. This step would highly impact Pakistan’s economy. India wanted to isolate Pakistan internationally after it faced the Pulwama attack. India is a Co-chair of the joint group and also a voting member of FATF and APG. Pakistan made a request to remove India from the group claiming bias and motivated actions but the request was rejected. India will be providing fresh evidence in the meeting to be held from Sunday by National Investigation Agency on the role of Pakistan’s terrorist groups in creating terror cells in the country. The Indian delegation for the meeting will be headed by Financial Intelligence Unit chief where India will try to put Pakistan on blacklist by mentioning activities of Pakistan based militant groups.

IF Pakistan is still on grey list it would face negatives consequences. Banking channels could be affected as they are associated with the international financial system. Import, export and access to international lending would be affected. Foreign Financial Institutions may carry out an enhanced checking of transactions to avoid risk of violations. Pakistan may face an estimated annual loss of approximately $10 billion and in case of being blacklisted its economy would be impacted severely.

In order to prevent itself from being blacklisted, Pakistan needs vote of at least 15 member countries out of 36 to come out of the grey list. The future listing will be decided later with a formal announcement that is to be made in October.