What does it mean for Pakistan to be removed from the FATF ‘grey’ list?
According to experts, Pakistan’s removal from the list will facilitate foreign direct investment and boost the country’s faltering economy.
At the end of its four-day plenary session in Germany on June 17. An international watchdog for combating money laundering and terrorism funding is expect to announce. Its judgment on whether or not to remove Pakistan from its “grey” list.
Since June 2018, Pakistan has been on the Financial Action Task Force’s (FATF) ‘grey’ list. According to the FATF’s previous plenary conference in March, Pakistan had completed 26 of the 27 action items in its 2018 action plan.
The FATF is an international organization found in 1989 to define international standards for preventing international financial crimes that aid terrorism.
While the Pakistani government is optimistic about the decision, State Minister for Foreign Affairs Hina Rabbani Khar has warned against “prejudicing the conclusion or speculative reportage.”
Exiting the grey list requires an “on-site” visit, which could take up to seven to eight months.
What is the grey list, and why is Pakistan on it?
The term “grey listing” refers to a country’s intensified surveillance by the FATF to assess. Its progress on anti-money laundering and anti-terrorism funding efforts. The “enhanced surveillance list” is another name for the “grey list.”
Pakistan, Syria, Turkey, Myanmar, Philippines, South Sudan, Uganda, and Yemen are among the 23 nations on the FATF’s heightened monitoring list — technically know as “jurisdictions with strategic weaknesses” — as of March 2022.
In essence, these countries have fail to prevent international money laundering and terrorism financing, according to the FATF, and are thus on a global watchlist.
To be removed from the grey list, a government must complete the FATF’s specified activities. Such as seizing the property of persons linked to terrorist organizations. If the FATF is please with the development, the country gets remove from the list.
The FATF just removed Zimbabwe from the grey list and Botswana and Mauritius before that. The FATF stated, “Zimbabwe has increased the efficacy of its anti-money laundering and counter-terrorist financing system and resolved relevant technical weaknesses to achieve the obligations in its action plan regarding the strategic deficiencies highlighted by the FATF in October 2019.” The terms “Anti-Money Laundering/Combating the Financing of Terrorism” and “Anti-Money Laundering/Combating the Financing of Terrorism” are interchangeable.
Pakistan originally appeared on the list in 2008, then left, and reappeared from 2012 to 2015. It has not removed from the list since 2018.
How does grey-listing impact a country?
According to a working paper by Tabadlab, an Islamabad-based advising firm, Pakistan’s grey-listing by the FATF from 2008 to 2019 may have resulted in a total GDP loss of USD 38 billion.
According to The Economist Intelligence Unit, adding to the grey list does not imply any economic penalties (unlike the blocklist). Still, it does warn the global financial and banking system about higher risks in dealings with the country in question.
A grey-list country also “faces challenges in accessing international loan instruments,” according to the Tabadlab study. Because key financial institutions like the IMF and World Bank are affiliate with FATF as observers. One example is a USD 6 billion IMF loan arrangement signe in July 2019. That stressed Pakistan’s need to comply with the FATF’s actions.
Despite loan help from Saudi Arabia and China, Pakistan’s economy is in bad health, with minimal foreign exchange reserves.
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