FATF decides to keep Pakistan on grey list

The Financial Action Task Force has decided to keep Pakistan on its grey list as it is yet to fully implement the action plan.

The decision was taken as its five-day virtual meeting in Paris that started on June 21 concluded.

Announcing the decision in a virtual press conference after the financial watchdog’s five-day plenary meeting, FATF President Dr Marcus Pleyer said, “Pakistan has made significant progress and it has largely addressed 26 out of 27 items on the action plan it first committed to in June 2018.”

Pleyer, however, added that the item on financial terrorism still needed to be addressed which concerned the “investigation and prosecution of senior leaders and commanders of UN-designated terror groups”.

He also pointed out that “a separate process has been taking place over the past few years” insofar as Pakistan was concerned

“Back in 2019, FATF regional partner, the Asia Pacific Group (APG), identified a number of serious issues during its assessment of Pakistan’s entire anti-money laundering and counter-terrorist financing system. Since then Pakistan has made improvements. This includes clear efforts to raise awareness in the private sector to money laundering risks and to develop and use financial intelligence to build cases.”

But, he said, Pakistan was still “failing to effectively implement the global FATF standards” across a number of areas.

“This means risks of money laundering remain high which in turn can fuel corruption and organised crime. That is why the FATF has worked with the Pakistan government to work on areas that need to be improved as part of the new action plan that largely focuses on money laundering risks. This includes increasing the number of investigations and prosecutions and making sure that law enforcement agencies cooperate internationally to trace, freeze and confiscate assets.

“This is about helping authorities stop corruption and prevent organised criminals from profiting from their crimes and undermining the financial system and legitimate economy in Pakistan,” Pleyer said.

When asked about the new action plan after the APG evaluation, Pleyer said the plan had “six action items including enhancing international cooperation and demonstrating that assistance is being sought from foreign countries in implementing UN Security Council designations”.

He said “this is about demonstrating that supervisors are conducting both onsite and offsite supervision commensurate with the specific risks associated with the non-financial sector.”

“It’s also about demonstrating that sanctions are applied to all legal persons and arrangements for non-compliance with beneficial ownership requirements; increase in money laundering investigations and demonstrating that non-financial sector is being monitored for compliance with proliferation financing requirements,” he added.

The watchdog’s president, responding to a question, said all items on both action plans needed to be addressed and goals fulfilled for countries to exit the grey list.

For Pakistan, Pleyer said, even after the last remaining item on the original action plan was addressed, delisting would not occur as there was a parallel action plan that was also given.

He said this while responding to a question from an Indian journalist, who had asked if Pakistan would be delisted after addressing the single remaining item on the original action plan or if the five additional items added by the Asia Pacific Group would also need to be addressed.

“As soon as this last remaining item of the [original] action plan is largely addressed, the members will decide whether they will grant an onsite [assessment] for this action plan. Usually once an onsite [assessment] has been successfully completed, the membership can decide on delisting a country.

“But in this case we have a parallel action plan with all the action items in the second action plan. Then Pakistan must also largely complete all the items on this action plan and then there will be a separate onsite [assessment] to decide on this action plan.

“So the delisting will not occur before both action plans are completed and two onsite [assessments] have been granted and successfully completed and have shown that the improvements are sustainable before the FATF members decide on delisting,” Pleyer said.

Earlier, a journalist had asked him if it was discouraging for other countries to observe that despite making significant progress and completing almost all items on the action plan, Pakistan was still being maintained on the grey list.

Responding to this, Pleyer said all items needed to be largely addressed for delisting to happen.

“Our rules and procedures are very clear. All deficiencies must be addressed and it would also be discouraging if other countries fully address all their action plan items and then got off the list, and some countries got off the list before they have completed all the action items. So the expectation is clear, we treat all countries equally.”

In its last presser following a plenary, on February 25, FATF President Dr Marcus Pleyer had said Pakistan remained under increased monitoring, adding that “while Islamabad has made significant progress, there remained some serious deficiencies in mechanisms to plug terrorism financing”.

The FATF plenary considered the report of Asia-Pacific Group on Pakistan. The APG, in its Mutual Evaluation Report (MER) on Pakistan released just weeks ago, had moved the country from enhanced (expedited) to enhanced follow-up list, Business Recorded reported.

The second follow-up MER on Pakistan uploaded by the AGP group on its website stated that overall, Pakistan has made notable progress in addressing the technical compliance deficiencies identified in its MER. Pakistan has been re-rated on 22 recommendations, and has been downgraded as non-compliant from partially compliant in one recommendation.

After adoption of MER, Pakistan was placed under Post Observation Period by the FATF, which expired in February 2021.

During the said period, Pakistan carried out major legal reforms with the enactment of 14 federal laws and three provincial laws along with relevant rules and regulations.

Pakistan submitted its report to the FATF on its Technical Compliance on October 1, 2020.

On Wednesday, Foreign Minister Shah Mahmood Qureshi said that the FATF had no justification to keep Pakistan on its grey list.

In a statement carried by Radio Pakistan, Qureshi said that Pakistan had completed the FATF’s technical requirements.

“We had been given 27 points in the FATF Action Plan, out of which work on 26 has been completed,” he said, adding that work was also being carried out to address the remaining item.

“In this situation, there is no justification to keep Pakistan on the grey list,” he said. He added that India wanted to use the forum for “political purposes” but should not be allowed to do so.

Pakistan has taken solid steps to curb money laundering and terrorist financing, he added.

In June 2018, FATF placed Pakistan on its list of “jurisdictions under increased monitoring” or grey list citing structural deficiencies, which, according to FATF, resulted in Pakistan’s failure to effectively combat terror financing and money laundering.

In February 2020, FATF expressed concerns over “Pakistan’s failure to complete its action plan in line with the agreed timelines and in light of the terrorist financing risks emanating from the jurisdiction.” Following this development, the global terror financing watchdog along with International Cooperation Review Group (ICRG) issued a 27-point Action Plan for Pakistan to address these structural deficiencies.

In October last year, FATF noted that Pakistan fully met the targets laid down in 21 of the 27 items of the Action Plan and asked the county to achieve full progress on the Action Plan by February 2021.

In February this year, FATF decided to keep Pakistan on its grey list, giving it four more months – June 20, 2021 – to complete its full action plan. It noted that Pakistan has made progress across all action plan items and it has now largely addressed 24 out of 27 items of the action plan.