Pakistan to remain on FATF grey list

Published June 25, 2021
FATF President Dr Marcus Pleyer addresses a virtual press conference on June 25. — DawnNewsTV screengrab
FATF President Dr Marcus Pleyer addresses a virtual press conference on June 25. — DawnNewsTV screengrab

The Financial Action Task Force (FATF) announced on Friday that Pakistan will continue to remain on the watchdog's "increased monitoring list", also known as the grey list, till it addresses the single remaining item on the original action plan agreed to in June 2018 as well as all items on a parallel action plan handed out by the watchdog's regional partner – the Asia Pacific Group (APG) – in 2019.

Announcing the decision in a virtual press conference after the financial watchdog's five-day plenary meeting, FATF President Dr Marcus Pleyer said, "Pakistan has made significant progress and it has largely addressed 26 out of 27 items on the action plan it first committed to in June 2018."

Pleyer, however, added that the item on financial terrorism still needed to be addressed which concerned the "investigation and prosecution of senior leaders and commanders of UN-designated terror groups".

He also pointed out that "a separate process has been taking place over the past few years" insofar as Pakistan was concerned.

"Back in 2019, FATF regional partner, the Asia Pacific Group (APG), identified a number of serious issues during its assessment of Pakistan’s entire anti-money laundering and counter-terrorist financing system. Since then Pakistan has made improvements. This includes clear efforts to raise awareness in the private sector to money laundering risks and to develop and use financial intelligence to build cases."

But, he said, Pakistan was still "failing to effectively implement the global FATF standards" across a number of areas.

"This means risks of money laundering remain high which in turn can fuel corruption and organised crime. That is why the FATF has worked with the Pakistan government to work on areas that need to be improved as part of the new action plan that largely focuses on money laundering risks. This includes increasing the number of investigations and prosecutions and making sure that law enforcement agencies cooperate internationally to trace, freeze and confiscate assets.

"This is about helping authorities stop corruption and prevent organised criminals from profiting from their crimes and undermining the financial system and legitimate economy in Pakistan," Pleyer said.

'6 more action items'

When asked about the new action plan after the APG evaluation, Pleyer said the plan had "six action items including enhancing international cooperation and demonstrating that assistance is being sought from foreign countries in implementing UN Security Council designations".

He said "this is about demonstrating that supervisors are conducting both onsite and offsite supervision commensurate with the specific risks associated with the non-financial sector."

"It’s also about demonstrating that sanctions are applied to all legal persons and arrangements for non-compliance with beneficial ownership requirements; increase in money laundering investigations and demonstrating that non-financial sector is being monitored for compliance with proliferation financing requirements," he added.

'Delisting only after both plans addressed'

The watchdog's president, responding to a question, said all items on both action plans needed to be addressed and goals fulfilled for Pakistan to exit the grey list.

Pleyer said even after the last remaining item on the original action plan was addressed, delisting would not occur as there was a parallel action plan that was also given.

He said this while responding to a question from an Indian journalist, who had asked if Pakistan would be delisted after addressing the single remaining item on the original action plan or if the five additional items added by the Asia Pacific Group would also need to be addressed.

"As soon as this last remaining item of the [original] action plan is largely addressed, the members will decide whether they will grant an onsite [assessment] for this action plan. Usually once an onsite [assessment] has been successfully completed, the membership can decide on delisting a country.

"But in this case we have a parallel action plan with all the action items in the second action plan. Then Pakistan must also largely complete all the items on this action plan and then there will be a separate onsite [assessment] to decide on this action plan.

"So the delisting will not occur before both action plans are completed and two onsite [assessments] have been granted and successfully completed and have shown that the improvements are sustainable before the FATF members decide on delisting," Pleyer said. 

'All countries treated equally'

Earlier, a journalist had asked him if it was discouraging for other countries to observe that despite making significant progress and completing almost all items on the action plan, Pakistan was still being maintained on the grey list.

Responding to this, Pleyer said all items needed to be largely addressed for delisting to happen.

"Our rules and procedures are very clear. All deficiencies must be addressed and it would also be discouraging if other countries fully address all their action plan items and then got off the list, and some countries got off the list before they have completed all the action items. So the expectation is clear, we treat all countries equally."

In its last presser following a plenary, on Feb 25, FATF President Dr Marcus Pleyer had said Pakistan remained under increased monitoring, adding that “while Islamabad has made significant progress, there remained some serious deficiencies in mechanisms to plug terrorism financing”.

A couple of days ago Foreign Minister Shah Mahmood Qureshi said that given Pakistan's recent progress, the financial watchdog had no justification to keep the country on its grey list.

"We had been given 27 points in the FATF Action Plan, out of which work on 26 has been completed," Qureshi had said, adding that work was afoot to address the remaining item.

Pakistan has been on the FATF’s grey list for deficiencies in its counter-terror financing and anti-money laundering regimes since June 2018.

Until the last assessment, Pakistan was found deficient in acting against organisations allegedly linked to the terror groups listed by the UN Security Council, prosecuting and convicting banned individuals and tackling smuggling of narcotics and precious stones.

In its last observation in Feb, the FATF president had reiterated that Pakistan had made "progress", but added: "[We] strongly urge completion of the plan [by Pakistan]."

He had insisted that Pakistan "must improve their investigations and prosecutions of all groups and entities financing terrorists and their associates and show [that] penalties by courts are effective. As soon as Pakistan shows it has completed these items, FATF will verify and members of FATF will vote."

FATF had stressed that Pakistan should fully address three remaining points on the action plan:

  • demonstrating that TF (terrorism financing) investigations and prosecutions target persons and entities acting on behalf or at the direction of the designated persons or entities;
  • demonstrating that TF prosecutions result in effective,proportionate and dissuasive sanctions; and
  • demonstrating effective implementation of targeted financial sanctions against all 1267 and 1373 designated terrorists, specifically those acting for or on their behalf.

The virtual meeting of the FATF Plenary took place under the presidency of Dr Marcus Pleyer, while delegates representing 205 members of the Global Network and observer organisations including the International Monetary Fund, the United Nations and the Egmont Group of Financial Intelligence Units were also in attendance.

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