FATF to decide whether Pakistan has done enough to exit grey list

The Financial Action Task Force (FATF) is expected to announce later today whether Pakistan has done enough to exit the grey-list as it wraps up its four-day plenary meeting.

The FATF president will give a press briefing on the outcomes of the FATF plenary at 9:30pm (16:30 GMT).

Background discussions with key officials and foreign diplomats suggest that the jury is divided — with the authorities claiming sufficient progress to be confident of a positive outcome but some diplomats suggesting that even in the best case scenario Pakistan would remain in the increased monitoring list (grey list) until June.

Ahead of the plenary which began on Monday, the FATF had updated the overall performance of all countries.

Based on this update, Pakistan has been shown improving compliance on two out of 40 recommendations of the FATF on effectiveness of anti-money laundering and combating financing terror (AML/CFT) systems.

It finds Pakistan’s progress non-compliant on four counts, partially compliant on 25 counts and largely compliant on nine recommendations. Pakistan’s evaluation at the plenary will be based on the 27-point action plan and not on these 40 recommendations.

Diplomats said they had not seen this time the kind of aggressive diplomatic effort Islamabad had been making in the past, particularly before the October 2020 plenary review. They said the plenary could discuss all options, including blacklisting Pakistan, keeping it in the grey list or removing it from the grey list.

There are, however, no chances that Pakistan could be put in the blacklist because it has at least three members of the FATF — China, Turkey and Malaysia — who can sustain all pressures against any downgrade.

This is not only based on friendly bilateral relations but performance as well. “From our perspective, we have completed all action points and complied with what the country was required to do, but sometimes some influential members can raise objections on a point that one can think is not justified,” said an official.

Pakistan fully complied with 21 out of 27-point action plan last year, leading the FATF to soften its stance from previously aggressive threats and yet it kept it in the grey list in October last year. Following robust progress on anti-money laundering and terror financing laws, rules, regulations and updating inter-agency and inter-provincial cooperation, the FATF narrative shifted towards Islamabad to “demonstrate” seriousness on ground through results and prosecutions.

In October last year, the FATF had announced that Pakistan had made progress across all action plan items and “largely addressed 21 of the 27 action items”. As all action plan deadlines stood expired, the FATF had said it strongly urged Pakistan to swiftly complete its full action plan by February 2021 appreciating that it took “note of the significant progress made on a number of action plan items”.

It had asked Pakistan to continue to work on implementing its action plan to address its strategic deficiencies by “demonstrating” that law enforcement agencies are identifying and investigating the widest range of terror financing (TF) activity and that TF investigations and prosecutions target designated persons and entities, and those acting on behalf or at the direction of the designated persons or entities.

Secondly, it was required to “demonstrate” that TF prosecutions result in effective, proportionate and dissuasive sanctions and thirdly to “demonstrate” effective implementation of targeted financial sanctions against all 1,267 and 1,373 designated terrorists and those acting for or on their behalf, preventing the raising and moving of funds, including in relation to non-profit organisations (NPOs), identifying and freezing movable and immovable assets and prohibiting access to funds and financial services.

Fourth and finally, it had asked Islamabad to “demonstrate” enforcement against terror financing sanctions (TFS) violations, including in relation to NPOs, of administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases.

The Foreign Office spokesman had said last week that Pakistan had made substantive progress on the remaining six items of the FATF action plan and was duly acknowledged by the wider FATF membership.

Pakistan has been on the FATF’s grey list for deficiencies in its counter-terror financing and anti-money laundering regimes since June 2018.

Until the last assessment, Pakistan was found deficient in acting against the organisations allegedly linked to the terror groups listed by the UN Security Council, prosecuting and convicting banned individuals and tackling smuggling of narcotics and precious stones.

Recently, the authorities had taken further steps including the prosecution of Lashkar-e-Taiba chief Hafiz Saeed and his associates in terror financing cases.