The Ministry of Commerce on Wednesday announced that the European Commission has removed Pakistan from its “High Risk Third Countries” list, which poses significant threats to the European Union’s financial system.
In a statement, the ministry stated that Pakistan was added to the EU’s list in October 2018, which imposed undue regulatory burdens on “Obligated Entities” within the Union and created obstacles in legal and financial transactions with individuals and entities based in Pakistan.
It further added that EU member states’ “Obligated Entities” will no longer be required to apply “Enhanced Customer Due Diligence” while conducting transactions with individuals and legal entities established in Pakistan.
The entities include credit institutions, financial institutions, auditors, external accountants, tax advisors, notaries, independent legal professionals (acting on behalf of and for their client in any financial or real estate transaction), estate agents and individuals trading in goods.
The EU High Risk Third Countries list is a list of countries that the union considers to have strategic deficiencies in their anti-money laundering and counter-terrorism financing frameworks.
According to the ministry, Pakistan’s exclusion from the list would add to the comfort level of the European economic operators and was likely to ease the cost and time of legal and financial transactions by Pakistani entities and individuals in the EU.
The EU’s delegation in Pakistan termed it an “important positive step” for Pakistan.
“In line with last year’s FATF decision, the EU has decided to remove Pakistan from its list of countries with high risk regarding money laundering and financing of terrorism,” it said on Twitter.
Foreign Minister Bilawal Bhutto Zardari tweeted that EU authorities have removed Pakistan from the List of High Risk Third Countries which have strategic deficiencies in their AML/CFT regime.
“Pakistani businesses and individuals would no longer be subjected to enhanced customer due diligence by European legal and economic operators,” he added.
Prime Minister Shehbaz Sharif, meanwhile, hailed it as a “major development” which would facilitate businesses, individuals and entities.
“It is a reflection of our unwavering resolve to further strengthen anti-money laundering and anti-terror financing regime,” he said.
Yesterday, Commerce Minister Syed Naveed Qamar also took to Twitter to announce that Pakistani businesses and individuals will no longer face “Enhanced Customer Due Diligence” by European legal and economic operators.
Federal Minister for Climate Change, Sherry Rehman, credited Foreign Minister Bilawal Bhutto Zardari for the “achievement” of Pakistan’s removal from the EU’s list in her response to the news.
“The good news in the current scenario is that the European Union has removed Pakistan from the list of high-risk countries. After this important development, exporters and traders will not face hurdles. The credit for this diplomatic success goes to Foreign Minister Bilawal Bhutto Zardari.” she said.
Rehman said Pakistan was included in the EU list of high-risk countries in 2018, which caused damage to Pakistan’s economy, exporters, and traders.
The Foreign Office also welcomed the move.
“The removal from the list will ease financial transactions between entities from Pakistan and the European Union. Pakistan looks forward to building on this development for mutually beneficial economic cooperation with the European Union and sharing its experience in the up-gradation of AML/CFT regimes with partner countries,” the FO said.
What does it mean to be on the list?
According to the EU website, the placement of countries on the list is meant to identify jurisdictions which have strategic deficiencies in their national AML/CFT regimes which pose significant threats to the financial system of the Union and hence the proper functioning of the internal market.
When a country is added to the list, it means that the EU believes that there are significant weaknesses in that country’s legal and regulatory systems for preventing financial crime and terrorist financing.
Once a country is added to the EU high-risk third countries list, certain additional measures are applied to financial transactions involving that country. These measures are designed to mitigate the risks posed by the deficiencies in the country’s anti-money laundering and counter-terrorism financing frameworks.
The specific measures that are applied may include increased customer due diligence requirements, enhanced monitoring of transactions, and restrictions or prohibitions on certain types of financial transactions.
In November last year, the United Kingdom also removed Pakistan from its ‘high-risk third countries’ list through a statutory instrument, effectively meaning that the country recognised Pakistan’s efforts to improve money laundering and terror financing curbs.