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Pakistan Saved from FATF BlackList

Pakistan Saved from FATF BlackList

Tag:GS2 || International Relations || India & it’s Neighbours || Pakistan

Why in news ?

  • Pakistan has managed to garner much-needed support from three member states of the Financial Action Task Force (FATF) to avoid being placed on its blacklist.

Pakistan and FATF :

  • Pakistan has been under the FATF’s scanner since 2018 June, 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.

Implications for Pakistan :

  • Loans would get costlier
  • Would scare away the investors
  • Increased scrutiny, longer transaction time, increased transaction cost.

About FATF:

  • What is it? The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 on the initiative of the G7. It is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas. The FATF Secretariat is housed at the OECD headquarters in Paris.
  • Objectives: The objectives of the FATF are 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.
  • Functions: The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures and promotes the adoption and implementation of appropriate measures globally. In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.

Members :

What is blacklist and grey list?

  • FATF maintains two different lists of countries: those that have deficiencies in their AML/CTF regimes, but they commit to an action plan to address these loopholes, and those that do not end up doing enough. The former is commonly known as grey list and latter as blacklist.
  • Once a country is blacklisted, FATF calls on other countries to apply enhanced due diligence and counter measures, increasing the cost of doing business with the country and in some cases severing it altogether. As of now there are only two countries in the blacklist — Iran and North Korea — and seven on the grey list, including Pakistan, Sri Lanka, Syria and Yemen.