THE GLOBAL TERROR FINANCE WATCHDOG: FATF

“Why has FATF retained Pakistan on ‘grey list’?” has been on the main headlines on most of the leading e-news providing platforms such as The Hindu, FirstPost, IndiaToday and many more..

What is FATF?- The FATF or Financial Action Task Force is a global, intergovernmental Organization founded in July, 1989 by the intergovernmental political forum G7 in a summit at Paris. G7 comprises countries that are world’s largest IMF advanced economies and wealthiest liberal democracies. The countries are- Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. Currently, there are 39 members of FATF(37 jurisdictions and 2 regional organizations). The FATF's decision making body, the FATF Plenary, meets three times per year.

Purpose of FATF- Financial action task force was made primarily to combat the issue of money laundering( process of cleaning of dirty money to legitimise it). The task force had to study the trends in money laundering, monitoring the legislation in different part of the world and developing standards and recommendations to combat money laundering. Following the September 11 attacks, in October 2001, the mandate was expanded to combat terrorism financing. Since April 2012, efforts have being made to counter the funding for weapons of mass destruction.

Lists issued by FATF- Since 2000, the financial action task force has been issuing 2 lists, namely the FATF Greylist and FATF Blacklist. These lists judge and enumerate the countries which have proven to be non-cooperative in the global fight of money laundering and terrorism financing.

• FATF Black list- Also known as the “call for action”, this list comprises the “non-cooperative countries or territories' '(NCCTs). Currently, two countries are in the list- North Korea and Iran.

• FATF Grey list- The countries under this list are jurisdictions under increased monitoring and have committed to resolve the identified deficiencies under the required time frame. As of February 2020, there are 19 countries on the grey list.

The story so far- “Why is Pakistan on the grey list?” The Islamic Republic of Pakistan has been placed under the areas of increased jurisdictions. Pakistan was first put on the list in 2008, removed in 2009 and then again from 2012 to 2015. This country failed to comply with the standards to combat the deficiencies on account of money laundering and terror financing. It was asked to implement an action plan for achieving 10 objectives.

At the October 2021 plenary, the FATF observed that the country has completed 26 out of 27 actions items in the 2018 plan. Pakistan has committed to address the shortcomings by implementing a new action plan which will primarily focus on combating money laundering.

Current Scenario- In the 39 membered FATF, support of at least 3 members is required to avoid being black-listed due to irregularities in compliance with standards set on money laundering and terror financing. Earlier, Pakistan got the support of its long term allies, China, Malaysia and Turkey. Now, since Turkey itself is in the grey list, it brings Pakistan under the direct line of fire if no changes are being made in their legislations regarding the ongoing fight against funding on terrorism.