Removal of Pakistan from FATF Grey List

What is the FATF Grey List 2022

FATF Grey List 2022 is an intergovernmental organization 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 Grey List Objectives

• Objectives:
  • 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.
  • It assesses the strength of a country’s anti-money laundering and anti-terror financing frameworks, however it does not go by individual cases.
• Headquarters: Paris, France.
• Decision making: The FATF Plenary is the decision making body of the FATF. It meets three times per year.
• Members:
  • The FATF currently has 39 members including two regional organizations – the European Commission and Gulf Cooperation Council.
  • India is a member of the FATF.
• Lists under FATF:
  • FATF Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF Grey List. This inclusion serves as a warning to the country that it may enter the blacklist.
  • FATF Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist. These countries support terror funding and money laundering activities.

FATF Grey List History

• Pakistan has been on the FATF Grey List for deficiencies in its Anti-Money Laundering/Combating the Financing of Terrorism regime (AML/CFT regime) since June 2018.
• When Pakistan was first placed on the grey list in 2018, it was presented with a 27-point action plan to check terror financing. Seven more points were added over time.
• This grey-listing has adversely impacted Pakistan’s imports, exports, and remittances and limited its access to international lending.

Pakistan Removal from FATF Grey List

• Based on consensus: The removal was announced after a consensus decision of all 39-members, including India to accept the review of Pakistan’s efforts on strengthening its AML/CFT regime.
• Pakistan’s efforts:
  • FATF announced that Pakistan fulfilled its commitments of its action plans regarding strategic deficiencies in its AML/CFT regime, encompassing 34 action items in total.
  • FATF welcomed Pakistan’s efforts to check terrorism, including the prosecution of UN-designated terrorists, cutting off funding for terror groups, and amending money laundering laws.
  • Pakistan had also provided “documentary evidence” of its efforts to seize the assets of terror groups, and of convicted terrorists like 26/11 accused terrorists.
• However, FATF asserted that Pakistan should continue to work with the APG (Asia-Pacific Group on Money Laundering) to further improve its AML/CFT system.

FATF Grey List Countries

• Grey list: Democratic Republic of the Congo, Tanzania and Mozambique were added to the grey list while Nicaragua was removed along with Pakistan.
• Blacklist: Myanmar was moved from the grey list to the “black list” due to actions by the military leadership after the 2021 coup, and will face even more severe financial sanctions.
• Suspension on Russia: Russia has been barred from participating in future projects of FATF.

Asia/Pacific Group on Money Laundering (APG)

• About:
  • It is a FATF style regional inter-governmental body, committed to implement international standards against money laundering (AML), the financing of terrorism (CTF) and financing the proliferation of weapons of mass destruction.
  • It was founded in 1997 in Bangkok, Thailand.
  • Jurisdictions that join the APG, either as members or as observers, commit to the Recommendations of the Financial Action Task Force (FATF).
• Headquarters: Sydney, Australia
• Members:
  • APG currently consists of 41 member jurisdictions in the Asia-Pacific region and a number of observer jurisdictions and international/regional observer organizations.
  • India is a member of the APG.
• Chairmanship:
  • APG has two Co-Chairs: one permanent and one two-year term rotating Co-Chair.
  • The permanent Co-Chair is Australia, and the current rotating Co-Chair is Canada (2022-2024).

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