FATF removes Pakistan from grey list

FATF removes Pakistan from grey list

Financial Action Task Force (FATF) on Friday decided to remove Pakistan from grey list after the country made compliance with the conditions.

FATF is the world’s money laundering and terror-financing watchdog. It said that Pakistan has been removed from the grey list and is no longer subject to its increased monitoring process.

The Paris-based inter-governmental body had put Pakistan on its grey list of untrustworthy jurisdictions in June 2018 because of “strategic counter-terrorist financing-related deficiencies.”

Plenary meeting of the FATF ended and made decision regarding Pakistan.

Earlier, Analysts at Arif Habib Limited said: “We expect Pakistan to be taken off the grey list by the FATF amid the progress Pakistan has made so far against money laundering and terrorist financing (AML/CFT) in the past few years.”

To recall, Pakistan was placed on FATF’s Grey List in June 2018 whereby it was found non-compliant with recommendations of the FATF which targeted areas of risk assessment, national cooperation, targeted sanctions, preventative measures, due diligence, internal and third party controls, law enforcement, regulation and supervision for money laundering and terror financing, amongst others.

Skip forward to 2022, the FATF Plenary in June, under the German Presidency of Dr. Marcus Pleyer, acknowledged the progress Pakistan made against money laundering and terrorist financing (AML/CFT) with all 34 action points implemented.

Through various bills and amendments, the Pakistani authorities had diligently worked to satisfy the FATF. These related to laws against money laundering, freezing of assets and filing of cases against proscribed organizations, actions against terror financing etc.

However, final decision to take Pakistan off the grey list was conditional upon successful on-site visit of FATF. FATF team conducted on-site visit to Pakistan few weeks back, with a purpose of inspecting the legal, regulatory and operational reforms and procedures implemented for compliance.

The analysts said that following the exit from the list, Pakistan will still be required to work with the APG (its relevant regional bodies) in the regular course of the follow-up process to make further improvements in its AML & CFT framework, as and when required.

Having already suffered direct consequences and economic difficulties from its time on the grey list, the climactic graduation of Pakistan from the grey list will come no less than a breath of fresh air. It will be a major relief and accomplishment for Pakistan, and is expected to reap benefits in both, short and long run.

The immediate ramification of exiting grey list carries reputational implication for Pakistan, we believe. This positive development bodes well for Pakistan’s image which was recently further dented by the downgrading of rating by International Credit Rating agencies like Moodys.

With the international community—investors in particular, the removal from grey list is likely to strengthen Pakistan’s position especially with regards to the soundness of our financial systems and help regain their confidence.

Markets are expected to react positively to this news and overall sentiment is likely to remain upbeat for a while. Moreover, going forward, this should also help strengthen Pakistan’s case of re-rating and upgrading by the International Credit Rating agencies.

In addition, one of the structural benchmarks laid down by the IMF for Pakistan stated ‘Adoption of measures to strengthen the effectiveness of the AML/CFT framework to support the country’s efforts to exit the Financial Action Task Force (FATF) list of jurisdictions with serious deficiencies.’ This means, Pakistan complies with one more structural benchmark of the IMF, paving way for successful ninth review which is due in November 2022 enabling disbursement of SDR 894 million from the Fund.