Context:
Pakistan was retained on the greylist, or list of countries under “increased monitoring”, at the Financial Action Task Force (FATF) once again, as the Paris-based UN watchdog judged it deficient in prosecuting the top leadership of UN Security Council-designated terror groups; the list includes Lashkar-e Taiba, Jaish-e Mohammad, Al Qaeda and the Taliban.
Relevance:
GS-II: International Relations (International Groupings or Agreements affecting India’s Interests, India’s neighbors), GS-III: Internal Security Challenges (Terrorism in Hinterland & Border Areas)
Dimensions of the Article:
- Financial Action Task Force (FATF)
- FATF Greylists
- FATF Blacklists
- About the recent FATF decision
Financial Action Task Force (FATF)
- The Financial Action Task Force (on Money Laundering) (FATF) is an intergovernmental organisation founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
- In 2001, its mandate was expanded to include terrorism financing.
- FATF is a “policy-making body” that works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
- FATF monitors progress in implementing its Recommendations through “peer reviews” (“mutual evaluations”) of member countries.
- Since 2000, FATF has maintained the FATF blacklist (formally called the “Call for action”) and the FATF greylist (formally called the “Other monitored jurisdictions”).
- The objectives of 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.
FATF Greylists
- FATF greylist is officially referred to as Jurisdictions Under Increased Monitoring.
- FATF grey list represent a much higher risk of money laundering and terrorism financing but have formally committed to working with the FATF to develop action plans that will address their AML/CFT deficiencies.
- The countries on the grey list are subject to increased monitoring by the FATF, which either assesses them directly or uses FATF-style regional bodies (FSRBs) to report on the progress they are making towards their AML/CFT goals.
- While grey-list classification is not as negative as the blacklist, countries on the list may still face economic sanctions from institutions like the IMF and the World Bank and experience adverse effects on trade.
- Unlike the next level “blacklist”, greylisting carries no legal sanctions, but it attracts economic strictures and restricts a country’s access to international loans
FATF Blacklists
- FATF Blacklists is Officially known as High-Risk Jurisdictions subject to a Call for Action.
- FATF blacklist sets out the countries that are considered deficient in their anti-money laundering and counter-financing of terrorism regulatory regimes.
- The list is intended to serve not only as a way of negatively highlighting these countries on the world stage, but as a warning of the high money laundering and terror financing risk that they present.
- It is extremely likely that blacklisted countries will be subject to economic sanctions and other prohibitive measures by FATF member states and other international organizations.
Effects of FATF Blacklisting
- The effect of the FATF Blacklist has been significant, and arguably has proven more important in international efforts against money laundering than has the FATF Recommendations.
- While, under international law, the FATF Blacklist carried with it no formal sanction, in reality, a jurisdiction placed on the FATF Blacklist often found itself under intense financial pressure.
- FATF makes sure funds are not easily accessible by terror organisations that are causing crimes against humanity.
- FATF has helped to fight against corruption by ‘grey-listing’ countries that do not meet Recommended Criteria and this helps to cripple economies and states that are aiding terrorist and corrupted organisations.
About the recent FATF decision
- Announcing the decision at the end of its latest Plenary session held virtually from June 21-25, the FATF said despite completing 26 of the 27 tasks it had been handed, Pakistan’s failure to complete the last task on convicting terrorists and terror entities meant it would not be delisted for now.
- In addition, the FATF has handed down another 6-point list of tasks mainly on money laundering actions to be completed as well.
- The FATF encourages Pakistan to continue to make progress to address as soon as possible the one remaining Countering Finance of Terrorism (CFT)-related item by demonstrating that Terror Financing investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups.
- During the FATF proceedings, Pakistan is believed to have provided documentation to show that it has prosecuted around 30 UNSC designated terrorists and their associates, charging them in 70 terror financing cases, of which convictions were granted in about 50 cases.
- Among the tasks handed down by the FATF on Friday, apart from the need to prosecute all UNSC terror entities successfully and seeking assistance from foreign countries to implement the UNSC designations, Pakistan is expected to amend its Money-Laundering Act, crackdown on Designated Non-Financial Businesses and Professions (DNFBPs) like real estate agencies and gemstone traders, confiscate and freeze assets of money laundering entities and monitoring businesses for proliferation financing, with sanctions for non-compliance.
India ‘politicising’ FATF process: Pakistan
- Reacting to the FATF decision at a press conference in Islamabad, Pakistan’s Energy minister accused India of attempting to “politicise the process” at the FATF.
- In the weeks leading up to the FATF plenary, Pakistan had been fairly confident of being let off the greylist during this session.
- Pakistan’s Foreign Minister had estimated a loss of $10 billion annually to the Pakistani economy for every year Pakistan has been on the greylist.
-Source: The Hindu
