New Delhi: Paris-based terror financing watchdog Financial Action Task Force (FATF) is set to announce Friday its decision on whether Pakistan will be downgraded to a high-risk jurisdiction, commonly called ‘blacklist’ with harshest sanctions, or be retained on the ‘grey list’.
The watchdog will take a call on Pakistan after assessing the steps taken by Islamabad in combating money laundering and terrorist financing.
Pakistan has been on the ‘grey list’ since June 2018.
If the FATF doesn’t move to blacklist Pakistan, which is likely, Islamabad will get a breather until February when the plenary — the watchdog’s highest decision-making body — meets next.
Cash-strapped Pakistan has lobbied hard with countries that yield considerable influence, such as the US and China, after it was placed on the ‘grey list’, or monitored jurisdiction, of the FATF last year.
The Imran Khan government was given time until this month to curb money laundering and the financing of terrorists residing in Pakistan, and their outfits, to avoid the ‘blacklist’.
At the plenary ending Friday, Islamabad needs at least three votes to escape the noose. China, Turkey and Malaysia have already announced their support for Pakistan at FATF.
India has, however, sought a downgrade for Islamabad citing its latest move to allow grant of pension to 26/11 mastermind and banned terrorist Hafiz Saeed from his frozen accounts.
What happens if Pakistan moves to the ‘blacklist’?
If the FATF moves to blacklist Pakistan, foreign investments will cease to enter the country while all international projects, including the China-led ‘Belt and Road Initiative’ (BRI), will either come to a screeching halt or will be highly monitored by the watchdog.
This will have far-reaching implications for an economy that is already reeling under severely adverse conditions.
How ‘grey list’ could affect Pakistan
Pakistan is likely to escape the harshest sanctions, having convinced the US and ally China that it has taken adequate measures in curbing terrorist financing. It will most likely remain on the ‘grey list’.
Further, the FATF presidency is currently with China. On 1 July, Xiangmin Liu, director-general of the legal department of Chinese central bank People’s Bank of China, assumed office as FATF president for one-year tenure.
However, even if Pakistan is retained on the grey list, the $6-billion bailout package it received from the International Monetary Fund earlier this year could come under jeopardy. So far, Pakistan has only got $1 billion out of the loan, with the remaining amount to be disbursed over the next three years.
As part of its compliance report submitted to the FATF, Pakistan has listed out the crackdown measures it has taken.
The FATF process
The FATF continually identifies and reviews jurisdictions that have shortcomings in combating money laundering and terrorist financing. These countries present a risk to the international financial system and their progress is closely monitored by the watchdog.
During its plenaries in February, June and October every year, the FATF discusses progress in actions to tackle money laundering and terrorist financing. This includes assessments that analyse how countries have implemented the FATF standards to protect the integrity of the global financial system.
The plenary finalises and approves new policy, including guidance and best practices to help countries fully and effectively implement FATF standards. It also reviews new and evolving threats to the global financial system and economy.
At present, Iran and North Korea are considered to be “high-risk jurisdictions” by the body.