FATF Announces Its Decision on Pakistan’s Grey List Status

The Plenary meetings of the FATF were held virtually from 21-25 June 2021, where its members discussed a range of topics relating to Pakistan’s progress. The Financial Action Task Force (FATF), on Friday, decided to keep Pakistan on the grey list.

The FATF has been holding a virtual session in Paris since June 21, which concluded today. The task force reviewed the Asia Pacific Group’s report on Pakistan’s compliance with the watchdog’s prescribed action items.

The FATF had held a session on June 23 to decide whether or not it will keep Pakistan on the grey list.

Pakistan has now completed 26 of the 27 action items in its 2018 action plan. The FATF encourages Pakistan to continue to make progress to address the one remaining CFT-related item as soon as possible by demonstrating that TF investigations and prosecutions target senior leaders and commanders of UN designated terrorist groups.

Announcing the decision, FATF President Dr. Marcus Pleyer said, “Pakistan has made significant measures and it has largely addressed 26 out of 27 measures.” However, he added that the action plan on financial terrorism still needed to be addressed.

“In 2019, the regional partner of FATF identified problems in Pakistan’s anti-money laundering measures. But since then it has improved. There remains risk of money laundering and subsequently FATF had discussions with Pakistan,” he said, adding, “I want to thank the Pakistan government for their continued commitment to address the concerns and make the necessary changes they were asked to effect”.

The FATF statement said, “In response to additional deficiencies later identified in Pakistan’s 2019 APG Mutual Evaluation Report (MER), Pakistan has made progress to address a number of the recommended actions in the MER and provided further high-level commitment in June 2021 to address these strategic deficiencies pursuant to a new action plan that primarily focuses on combating money laundering”.

Since June 2018, when Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime and to address its strategic counter-terrorist financing-related deficiencies, Pakistan’s continued political commitment has led to significant progress across a comprehensive CFT action plan.

The FATF recognizes Pakistan’s progress and efforts to address these CFT action plan items and notes that since February 2021, Pakistan has made progress to complete two of the three remaining action items on demonstrating that effective, proportionate and dissuasive sanctions are imposed for TF convictions and that Pakistan’s targeted financial sanctions regime was being used effectively to targeted terrorist assets.

FATF statement said that Pakistan should continue to work to address its strategically important AML/CFT deficiencies, namely by:

  1. Enhancing international cooperation by amending the MLA law;
  2. Demonstrating that assistance is being sought from foreign countries in implementing UNSCR 1373 designations;
  3. Demonstrating that supervisors are conducting both on-site and off-site supervision commensurate with specific risks associated with DNFBPs, including applying appropriate sanctions where necessary;
  4. Demonstrating that proportionate and dissuasive sanctions are applied consistently to all legal persons and legal arrangements for non-compliance with beneficial ownership requirements;
  5. Demonstrating an increase in ML investigations and prosecutions and that proceeds of crime continue to be restrained and confiscated in line with Pakistan’s risk profile, including working with foreign counterparts to trace, freeze, and confiscate assets; and
  6. Demonstrating that DNFBPs are being monitored for compliance with proliferation financing requirements and that sanctions are being imposed.

Prior to this decision announcement, Foreign Minister Shah Mahmood Qureshi had said that there was no longer any justification to keep Pakistan on the grey list as the country had fulfilled 26 out of 27 action items of the FATF.

In a statement — two days after FATF’s five-day virtual meeting began in Paris — the foreign minister said that Pakistan had fulfilled the anti-money laundering watchdog’s maximum technical requirements. “Pakistan has taken concrete steps to curb money-laundering and terrorist financing,” he said.

He also accused India of making attempts to misuse the forum for political purposes.

The steps taken by Pakistan include the promulgation of strict laws against money laundering, freezing of assets, and filing of cases against banned organizations, he said.

Resultantly, the Asia Pacific Group on Money Laundering improved Pakistan’s rating against money laundering and terror financing. Moreover, the Pakistan European Union Joint Commission had also welcomed the country’s progress in the implementation of FATF points.

In February, the FATF had said Pakistan will remain on the grey list till June, saying the country remains under “increased monitoring” when it comes to terror-financing.

FATF President Dr. Marcus Pleyer had said that while the FATF recognizes Pakistan’s counterterrorism efforts, there were still some serious deficiencies that the country needs to address.

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