• FATF grey list marks continuing economic pressure which involve inability to transfer funds to individuals, firms and corporations.

• The grey list continues even after Pakistan’s Senate unanimously approved two bills related to the tough conditions set by FATF.

Pakistan will stay in FATF grey list due to terror financing. This will continue the country’s economic pressures. The FATF President made the announcement today breaking any hopes for Pakistan to move out of this monitoring list in near future.

What is FATF Grey List?

FATF Grey List is a list of countries that the intragovernmental organization considers non-cooperative in the global effort to combat money laundering and the financing of terrorism. By issuing the list, the FATF hopes to encourage countries to improve their regulatory regimes and establish a global set of AML/CFT standards and norms.

While grey-list classification is not as negative as the blacklist, countries on the list may still face economic sanctions from institutions like the IMF and the World Bank and experience adverse effects on trade.

Which countries are in FATF Grey List in 2020?

The FATF’s current Grey List was issued on 21 February 2020. It includes the following countries: Albania, the Bahamas, Barbados, Botswana, Cambodia, Ghana, Iceland, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda, Yemen and Zimbabwe.

Why is Pakistan on FATF Grey List?

Countries are consideration for becoming safe haven for supporting terror funding and money laundering are on the list in FATF. Pakistan has been continuously blamed for supporting terror organizations. This has been the main cause for Pakistan’s entry into the grey list.

In its third plenary held virtually in June, the FATF decided to keep Pakistan in the grey list as Islamabad failed to check flow of money to terror groups like Lashkar-e-Taiba (LeT) and Jaish-e-Mohammed (JeM). However, Pakistan has been able to clear 21 out of 27 action items in the latest review.

Although, it is able to clear 21 items, Pakistan could not grab the trust of international organization. Thus, it continues to stay in the list for another year. Interestingly, Pakistani Man Gets 12 billion in his Account; Doesn’t Know Who Sent It? These kind of fictitious financial transactions are one of the reasons behind the inclusion in the grey list. 

Can Pakistan enter FATF blacklist?

The FATF blacklist sets out the countries that are considered deficient in their anti-money laundering and counter-financing of terrorism regulatory regimes. The list is intended to serve not only as a way of negatively highlighting these countries on the world stage, but as a warning of the high money laundering and terror financing risk that they present. Thus, it is extremely likely that blacklisted countries will be subject to economic sanctions and other prohibitive measures by FATF member states and other international organizations.

The current FATF blacklist includes only two countries: North Korea and Iran. Thus, it seems difficult that Pakistan will enter the FATF blacklist anytime soon. Yet, the stay on grey list is also damaging for its overall economic health.

Pakistan’s Response on FATF

Mr. Hammad Azhar adds: Pak has achieved impressive progress on its FATF action plan. 21 out of 27 action items now stand cleared. Remaining 6 rated as partially complete. Within a year, we progressed from 5/27 to 21/27 completed items. FATF acknowledged that any blacklisting is off the table now.

Instead of current Action Plan, discussions remained focused on how Pak can be facilitated for our upcoming 2nd evaluation (MER), due mid next year. Further, he congratulates the government for working day and night for the cause.

What’s next for Pakistan w.r.t FATF?

Pakistan will be undergoing another review by February 2021. It needs to ensure that it examines all its laws with respect to FATF and make amendments in these laws and policies. Let’s hope Pakistan is able to put corrective measures on the six remaining indicators.