ISLAMABAD: There were higher prospects of Pakistan exiting the Financial Action Task Force (FATF) “grey list”, sources said, as the global anti-money laundering watchdog plenary was under way in Paris on Friday.
FATF President T Raja Kumar will hold a press conference to announce the outcomes of the plenary after it has ended. The press conference is scheduled for 8pm.
The global anti-money laundering watchdog in June expressed satisfaction with Pakistan’s performance but it stopped short of removing it from its ‘grey list’. Body’s president Dr Marcus Pleyer said that a FATF team would conduct an on-site visit to Pakistan at the earliest possible date.
Read: FATF has acknowledged the completion of both action plans: Hina
The Paris-based FATF acknowledged the completion of both action plans by Pakistan.
“Pakistan is one step away from exiting the FATF ‘grey list’ and we are closely working with FATF to arrange a meeting,” State Minister for Foreign Affairs Hina Rabbani Khar, who lead Pakistan’s delegation to the plenary meeting in Berlin, said in a press conference in Islamabad on June 18.
Economic experts were of the view that there were no reasons for Pakistan’s stay in the FATF’s ‘grey list’ as the country has met all the conditions. They added that it would build investor’s confidence on the country.
Last month, the foreign office said a FATF technical team had conducted a “successful” visit and Islamabad was expecting a “logical conclusion” of the evaluation process in October.
Pakistan was listed in 2018 because of “strategic counter-terrorist financing-related deficiencies.” FATF gave the country a wide-ranging reforms programme.
If removed from the list, Pakistan would essentially receive a reputational boost and get a clean bill of health from the international community on terrorist financing.
While it would not have an impact on the country’s struggling economy as a whole, it would help reduce scrutiny of global transactions involving Pakistan, economist and former Citigroup banker Yousuf Nazar told Reuters on Thursday.
Read: FATF satisfied with Pakistan, removal from ‘grey list’ after on-site visit
Two large Pakistani banks, HBL and National Bank of Pakistan, paid $225 million in 2017 and $55 million in 2022 respectively in fines imposed by US regulators for compliance failures and anti-money laundering violations.
Removal from the FATF list would provide Pakistan a boost after the country’s sovereign credit rating was downgraded by Moody’s. It would also improve sentiment, important from a foreign direct investment perspective.
FATF says being on the “grey list” does not mean any extra due diligence measures by financial institutions, but the body does stress the need for considering associated risks when dealing with such countries.
The global money laundering and terrorism financing watchdog could call on international financial institutions to close their activities in, and association with, offending countries and push governments to apply financial sanctions if the country is downgraded from the “grey list” to the “black list” or a “high-risk” entity.
There are currently two “black-listed” countries: Iran and North Korea. Pakistan was widely reported as being close to being “black-listed” a few years ago.
A removal from the list would mark the culmination of a four-year reforms process that has required far-reaching changes to Pakistan’s financial system, in particular to laws governing money laundering and terrorism financing.
Pakistan was given an action plan by FATF in 2018 to address strategic counter-terrorist financing-related deficiencies by passing legislation and restructuring coordination between law enforcement and financial institutions.
FATF last said Pakistan has completed all items in its action plan barring one: to demonstrate investigations and prosecutions against senior leaders of UN-designated militant groups.
“When Pakistan, in recent months, announced new sentences for Hafiz Saeed and Sajid Mir - two top terrorists of Lashkar-e-Taiba, one of the key terrorist groups under the FATF spotlight - that’s what got things done in the end,” said Michael Kugelman, director of the South Asia Institute at the Washington-based Wilson Center think-tank.
The two were allegedly involved in the 2008 Mumbai attacks in neighbouring India that killed over 160 people.
Pakistan’s latest actions to jail, fine and confiscate assets of individuals linked to anti-India militant groups are key reasons it could be taken off the list, said Citibank’s Nazar.
