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Will Financial Action Task Force put Pakistan in its Blacklist

Will Financial Action Task Force put Pakistan in its Blacklist

Tag: GS 2 || International Relations || India & its Neighbours || Pakistan

Why in news?

  • Pakistan has been under the FATF’s scanner since June 2018, when it was put on the greylist for terror financing and money laundering risks, after an assessment of its financial system and law enforcement mechanisms.

Issue

  • The Financial Action Task Force (FATF) will hold its Plenary and Working Group meeting in Orlando, Florida.
  • The June 16-21 Plenary could take up a proposal to downgrade Pakistan to the blacklist on terrorist financing from its current “greylisted” status.

Present status

  • Under the FATF’s scanner since June 2018: Pakistan has been under the FATF’s scanner since June 2018, when it was put on the greylist for terror financing and money laundering risks, after an assessment of its financial system and law enforcement mechanisms.
  • Under greylist: FATF and its partners such as the Asia Pacific Group (APG) review Pakistan’s processes, systems, and weaknesses on the basis of a standard matrix for anti-money laundering (AML) and combating the financing of terrorism (CFT)

Pakistan’s subsequent commitment

  • June 2018: In June 2018, Pakistan gave a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime, and to address its strategic counter-terrorism financing-related deficiencies.
  • Based on this commitment, Pakistan and the FATF agreed on the monitoring of 27 indicators under a 10-point action plan, with deadlines.
    • successful implementation of the action plan and its physical verification by the APG will lead the FATF to move Pakistan out of the greylist;
    • failure by Pakistan will result in its blacklisting by September 2019.

Current stance

  • Limited progress by Pakistan: In a statement, the FATF said in February 2019: “Given the limited progress on action plan items due in January 2019, the FATF urges Pakistan to swiftly complete its action plan, particularly those with timelines of May 2019.”
  • Joint Group informed Pakistan its compliance was unsatisfactory: Recently, at a meeting in Guangzhou, China, Pakistan presented its progress on the 27 indicators in a meeting with the Joint Group of the APG. India is co-chair of the Joint Group.
    • The Joint Group informed Islamabad that its compliance on 18 of the 27 indicators was unsatisfactory, and asked it to do more to demonstrate strict action against eight terrorist groups, and in combating money laundering.

India’s role

  • India is a voting member of the FATF and APG, and co-chair of the Joint Group where it is represented by the Director General of India’s Financial Intelligence Unit (FIU).
    • Pakistan had asked for India’s removal from the group, citing bias and motivated action, but that demand has been rejected.
  • India was not part of the group that moved the resolution to greylist Pakistan last year in Paris.
    • The movers were the US, UK, France, and Germany; China did not oppose.

If Pak is blacklisted

  • Economy will get weaker: Pakistan faces an estimated annual loss of $10 billion if it stays in the greylist; if blacklisted, its already fragile economy will be dealt a powerful blow.
  • Loan with IMF will be threatened: Pakistan’s $6 billion loan agreement with the International Monetary Fund (IMF) could be threatened. The IMF has asked Pakistan to show commitment against money laundering and terror financing.

Mains question

  • Will being put on the FATF watch list force Pakistan to withdraw state support to terror groups?