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PAKISTAN TO REMAIN ON FATF 'GREY LIST'

The Financial Action Task Force (FATF) decided to retain Pakistan on “increased monitoring list’. “Increased monitoring list” is another name for the Grey List.

BACKGROUND OF THE ISSUE

The FATF had issued the 27-point action plan after placing Pakistan on the ‘Grey List’ in June 2018. The action plan pertains to curbing money laundering and terror financing. During the October-2020 Plenary, due to the Covid-19 pandemic, Pakistan was given an extension for full compliance with the 27-point action plan till February 2021. It had then not fully complied with 6 of the 27 directives. In February 2021, FATF acknowledged Pakistan’s significant progress in combating terrorism, however it was still to fully comply with three of the 27-point action plan. The three points pertained to effective steps in terms of financial sanctions and penalties against the terror funding infrastructure and the entities involved.

ABOUT THE ISSUE

The FATF said Pakistan had failed to take appropriate action against UN-designated terrorists such as 26/11 accused Hafiz Saeed and JeM chief Masood Azhar. However, Pakistan has completed 26 of the 27 action items. The FATF encourages Pakistan to continue to make progress to address as soon as possible the one remaining Countering Finance of Terrorism (CFT)-related item by demonstrating that Terror Financing investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups. In addition, the FATF has handed down another 6-point list of tasks mainly on money laundering actions to be completed as well. Pakistan is expected to amend its Money-Laundering Act, crackdown on Designated Non-Financial Businesses and Professions (DNFBPs) like real estate agencies and gemstone traders, confiscate and freeze assets of money laundering entities and monitor businesses for proliferation financing, with sanctions for non-compliance.

SIGNIFICANCE

In Pakistan's case, the FATF has taken cognizance of the inaction against several banned  organisations involved in raising funds for terror activities and those linked to global terrorists like Jaish-e-Mohammed chief Masood Azhar and Lashkar-e-Taiba’s Hafiz Saeed and its operations chief Zaki-Ur Rahman Lakhvi. On several occasions, India has also raised the involvement of elements within Pakistan in a number of terror cases, including the 26/11 Mumbai and Pulwama attacks. Perpetual containment of Pakistan on the grey list of FATF would further pressurise Pakistan to take adequate measures to prevent such terrorist attacks on India from its soil. Unlike the next level “blacklist”, greylisting carries no legal sanctions, but it attracts economic strictures and restricts a country’s access to international loans.

Pakistan’s Foreign Minister had estimated a loss of $10 billion annually to the Pakistani economy for every year Pakistan has been on the greylist.

FINANCIAL ACTION TASK FORCE

• It is an inter-governmental body established in 1989 during the G7 Summit in Paris. The FATF assesses the strength of a country’s anti-money laundering and anti-terror financing frameworks, however it does not go by individual cases.
• Objectives: 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.
• Headquarters: Its Secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris.
• Member Countries: The FATF currently has 39 members including two regional organisations — the European Commission and Gulf Cooperation Council. India is a member of the FATF.

LISTS UNDER FINANCIAL ACTION TASK FORCE

• Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.
• Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put in the These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.
• Sessions: The FATF Plenary is the decision making body of the FATF. It meets three times per year.

FATF’S View on Crime amid Covid-19: The FATF which is actively monitoring the impact of the pandemic on measures to combat illicit financing, released a paper on “Covid-19-related Money Laundering and Terrorist Financing Risks and Policy Responses”. It observed an increase in the Covid-19 related crimes, including fraud, cyber-crime, misdirection or exploitation of government funds or international finance assistance.

INDIA AND FATF:

India plans to share more evidence with the key FATF members on the narco-terror cases linked to Pakistan-based syndicates, through which funds are allegedly being supplied to the terrorists operating in Jammu and Kashmir. The Enforcement Directorate and the National Investigation Agency have been probing several such cases.

TEST YOURSELF

Q.1 Financial Action Task Force (FATF) decided to retain Pakistan on “increased monitoring list’. “Increased monitoring list” which is another name for the ___________?

1. Black List
2. Grey List: ANSWER
3. Red List
4. None of the following

Q.2 Which of the following statements is/are incorrect in the reference to the Pakistan remaining on the FATF list?

1. FATF had issued the 27-point action plan after placing Pakistan on the ‘Blue List’ in June 2020 which pertains to curbing money laundering and terror financing.
2. Pakistan was given an extension for full compliance with the 27-point action plan till February 2021 but it had then not fully complied with 6 of the 27 directives.

1. Only I follows: ANSWER
2. Only II follows
3. Both I & II follows
4. None of the above

Q.3 Which of the following is/are correct in the context of objectives of the Financial Action Task Force (FATF)?

1. Combating money laundering
2. Terrorist financing
3. Preventing threats to the integrity of the international financial system.
4. All of the above-mentioned: ANSWER

Q.4 Financial Action Task Force (FATF) was established during the ____________?

1. G7 summit in Paris, France: ANSWER
2. G20 summit in London, United Kingdom
3. NATO summit in Brussels, Belgium
4. None of the following

Q.5 Consider the given statements & state and state which of the following is/are correct in the reference to the above mentioned passage?

1. The FATF currently has 39 members including two regional organisations — the European Commission and North Atlantic Treaty Organization.
2. India is a member of the FATF: ANSWER
3. Its Secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Geneva, Switzerland?
4. None of the above