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Financial Action Task Force (FATF) as the international watchdog announced that the Pakistan could be removed from the “grey list” after a visit by a fact-finding team to verify the measures it has taken to deal with terror financing.
What is the grey list, and why is Pakistan on it?
- Grey listing means FATF has placed a country under increased monitoring to check its progress on measures against money laundering and terrorism financing.
- The “grey list” is also known as the “increased monitoring list”.
How does grey-listing impact Pakistan?
- Pakistan’s grey-listing by the FATF from 2008 to 2019 may have resulted in a cumulative GDP loss of USD 38 billion
- Grey list signals to the global financial and banking system about increased risks in transactions with the country
- Faces complications in accessing international lending instruments by major financial institutions like IMF and World Bank
- Pakistan’s economy is in poor shape, and it is staring at low reserves of foreign exchanges, despite loan assistance from Saudi Arabia and China.
What has to be done to pull out of the grey list?
- Country has to fulfill the tasks recommended by the FATF, for instance, confiscating properties of individuals associated with terrorist groups.
- If the FATF is satisfied with the progress, it removes the country from the list.
What has Pakistan done so far?
- 2018: Pakistan added to the grey list, and the FATF has issued an action plan 2018, outlining all of the issues and tasks that Pakistan must complete.
- Plenary session of June 2021: FATF had said Pakistan needed to “investigate and prosecute” senior leaders and commanders of UN-designated terror groups
- March 2022: Pakistan’s progress was appreciated in March this year by the global body, which noted that it had “completed 26 of the 27 action items in its 2018 action plan
- The FATF encouraged Pakistan to address the one remaining item by continuing terror financing investigations and prosecutions of senior leaders and commanders of UN-designated terrorist groups.
How the decision is taken and India’s stance on the decision?
- Most Western nations and China, who are members of the FATF working group, cleared Pakistan’s case at an emergency internal meeting.
- As the decision was by consensus, India was not asked to vote on the decision
- India’s Stance
- India is suspicious about the Pakistan’s commitment to completely end terror safe haven in the country, This is because the infiltration in Jammu and Kashmir is still going on and “small arms and IEDs (Improvised Explosive Device) ” are being used.
- And it is believed that Pakistan received support from the permanent members of the United Nations Security Council in getting itself out of the “grey list”.
About Financial Action Task Force on (FATF)
Background
- In response to mounting concern over money laundering, the Financial Action Task Force on Money Laundering (FATF) was established by the G-7 Summit that was held in Paris in 1989.
What is FATF?
- The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog.
- The intergovernmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society.
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.
Members and Observers:
- 39 Members (37 member jurisdictions and 2 regional organizations the European Commission and the Gulf Cooperation Council.)
- FATF Observer: Indonesia
- India is a member of the FATF consultations and its Asia Pacific Group
What is Black List and Grey List
- Black List or High-Risk Jurisdictions subject to a Call for Action :
- Countries known as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist.
- These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.
- Grey List or Jurisdiction under increased monitoring:
- 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.
Current status of the list
- Black list: 2 Countries Democratic People’s Republic of Korea, Iran continue to remain in the list ie, no change to the list
- Grey list: 23 countries
- UAE is the country recently added in the grey list
- Zimbabwe get removed from grey list recently
Content Source: Indian Express