What is the Significance of Removal from FATF Grey List?
Senior leaders from across the world attend the four-day FATF plenary to discuss a range of money laundering and terrorist financing issues. Finally The Financial Action Task Force (FATF) announced removal of Pakistan from grey list because Pakistan has fully met all 34 action items in its 2018 action plan. However, one last step is left which is on-site visit which would further take seven to eight months.
The FATF, established in 1989, sets international standards for preventing international financial crimes that aid terrorism. Pakistan’s History with the Financial Action Task Force (FATF), the international watchdog against money laundering and financing of terrorism can be traced back to 2008when the country was first placed on its increasing monitoring list, which is called “grey list”. This list has the names of countries which allegedly fail to take adequate measures to restrict terror financing and money laundering. When FATF places a jurisdiction against increased monitoring which means that the country within the timeframe has committed to resolving swiftly the identified strategic deficiencies and is subject to increased monitoring. This list is often externally as ‘grey list’. Pakistan has been on FATF’s increased monitoring list since 2008 and twice more in 2012 and 2018.
“Getting off the FATF grey list is a highly technical process, but at some point, the international community needs to recognize Pakistan for the genuine steps it has taken against certain militant groups and their leaders,” said Adam Weinstein, a research fellow specializing in Pakistan and Afghanistan at the Quincy Institute for Responsible Statecraft. He further added that there are many countries who present more money-laundering risk than Pakistan but Pakistan has been singled out due to terrorism.
The removal from the list will enhance imports, exports, remittances and access to international loans as Pakistan’s economy relies on foreign investors. Foreign direct investment and financial assistance from international investors will help the South Asian country help in establishing and enhancing it’s swaying economy. According to Weinstein, lifting Pakistan from the list will remove one more barrier to foreign direct investment, but many other self-inflicted ones will still exist. “It’s hard to calculate the impact of a grey listing because it incurs repetitional costs, deters foreign investment, and may even reduce consumer spending,” he said.
The worldwide body was at first set to foster measures to battle tax evasion i.e money laundering, however after the 9/11 assaults, its job extended to terrorist financing. FATF norms currently guarantee a planned worldwide reaction to forestall organised crime, corruption, and terrorism. It additionally attempts to help authorities to stop funding for weapons used for mass destruction. The meeting was attended by FATF delegates representing 206 members of the global network and its observers, including the International Monetary Fund (IMF), the United Nations, and the World Bank.
Micheal Kugelman, deputy director and senior associate for South Asia at Wilson Centre, tweeted that “Removal from the gray list would be a big boost for Pakistan during a serious economic crisis, as investors/banks would no longer have to worry about any reputational risks associated with doing business with Pakistan while it’s on a watch list for terrorist financing.”
Read Also: Economic Instability and Pakistan’s Future
As Pakistan is no longer a country at high-risk so the international trade will expand. Basically, Pakistan is currently in a more grounded position to grasp the issues like devaluing of currency, broadening import/export imbalance, and runaway inflation.
