June 28, 2021 (MLN): The Financial Action Task Force (FATF) yet again refused to take Pakistan out of the ‘Grey List’ despite the country meeting 26 of the 27 points that the FATF recommended earlier.
Although it is believed that the progress on the 27-point action plan by Pakistan is largely beneficial for the country, the FATF appears to be too stern against Pakistan, primarily for diplomatic and political reasons, as despite significant progress on all action plans, the county continues to remain in the grey list.
A report by BMA Capital projected that Pakistan is expected to remain on the grey list for at least one or more years, given strained relationships with some key countries and the imposition of a new action plan. On the other side, there is a minimal chance that Pakistan could be put on the blacklist as it has at least three members of the FATF supporting its cause.
Through various bills and amendments, the government has been working hard to make necessary rectifications to clear its reputation since June 2018 when the country was placed in the watchdog's “increased monitoring list”, also known as the grey list. Since then, it is worth noting that Pakistan has made significant progress on the said AML/CFT recommendations and all of this was reflected in the Asia Pacific Group (APG)’s report that was published earlier this month, where it had upgraded Pakistan’s rating on 22 out of the 40 technical recommendations of the FATF that related to money laundering and terror financing.
In its last Plenary meeting, which was held in February, the watchdog had noted that despite significant progress, Pakistan would remain under its grey list as there remained some serious deficiencies in mechanisms to plug terrorism financing.
Looking at the overall picture, Pakistan has implemented 26 out of 27 points in the FATF action plan. As far as the technical recommendations are concerned, out of the total 40 recommendations, Pakistan is largely compliant with 24 recommendations, Complaint with 7 recommendations, Partially compliant with 7 recommendations, and non-compliant with 2 recommendations.
Cross-country comparison of similar cases reveals that Mongolia managed to get out of the Grey List in just 12 months despite being Non-Compliant/Largely Compliant/Compliant on 5/15/5 of the total 40 FATF recommendations as compared to 2/24/7 areas of Pakistan. Although extensions have been granted given Pakistan’s progress, the issue continues to linger on mainly due to lobbying by a hostile neighbor country and its diplomatic channels, the report cited.
Besides, the report indicates that the deteriorating relationship with France due to the previous diplomatic row on the blasphemy issue, also likely to keep Pakistan in the grey list as France had earlier recommended keeping Pakistan’s position unchanged until it has complied with all the recommendations.
In addition to this, the new action plan is being implemented under the parallel APG investigation which has dampened the hopes of near-term exit from the grey list because now, Pakistan will not only need to largely address the remaining 1/27 action plan but also the new action plan related to money laundering to exit the grey list.
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