It seems that Pakistan’s bad days are here to stay. In the latest blow by the Global Money Laundering & Terrorist Financing Threat Assessment organization, Pakistan has been formally placed in the strategic deficiencies of The Financial Action Task Force (FATF). The organization has put another 10 countries –Sri Lanka, Bahamas, Botswana, Ethiopia, Ghana, Serbia, Syria, Trinidad and Tobago, Tunisia and Yemen among the jurisdictions having strategic deficiencies in combating terror financing and anti-money laundering. The news was confirmed by a statement from Reserve Bank of India. “FATF has also called on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/FT) risks emanating from the jurisdiction of Democratic People’s Republic of Korea (DPRK),” included the RBI statement.
FATF is an intergovernmental organization founded in 1989 by G7 (a group consisting of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) to develop policies to combat money laundering, and in 2001 its mandate expanded to include terrorism financing. “In June 2018, Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime and to address its strategic counter-terrorist financing-related deficiencies. Pakistan will work to implement its action plan to accomplish various objectives. These include demonstrating that terror financing risks are properly identified, assessed, and that supervision is applied on a risk-sensitive basis, remedial actions and sanctions are applied in cases of AML/CFT violations, and that these actions have an effect on AML/CFT compliance by financial institutions,” said FATF on Pakistan.
In June 2018, FATF formally placed Pakistan in ‘grey list’. The FATF prepares two lists, the ‘blacklist’ and ‘Grey list’. If a country is included in the blacklist then it has to face international sanctions, although the actions against a grey list country are minimal. The chances of being included in the blacklist were looming over Pakistan and the country was so scared that it sent interim finance minister Dr. Shamshad Akhtar to Paris where the FATF was to decide whether the country should be placed on the blacklist of countries that financially aid terrorism. The delegation sent to defend the country included officials from the Federal Investigation Agency (FIA), State Bank of Pakistan (SBP), Finance Ministry and the Financial Monitoring Unit (FMU).
Pakistan needs to understand that if they do not take prompt action against terrorism on their soil, they will be included in the blacklist and suffer further economic sanctions. Now, Pakistan stands in the league of countries like the Bahamas, Botswana, Ethiopia, Ghana, Serbia, Syria, Trinidad and Tobago, Tunisia and Yemen which are considered by and large ‘failed states’ by the international community. The country should curb its terrorist activities or risk serious fallout on the Pakistani economy.
If a country is included in the FATF blacklist or grey list, its overall investment position goes down. The countries which are included in blacklist are not allowed to issue government bonds through which the government of a country borrows from the international market.