Financial Action Task Force (FATF)

Context

  • The global terror financing watchdog, Financial Action Task Force (FATF) has asked Pakistan more questions on the action it has taken against madrassas run by proscribed outfits.
  • The FATF has kept Pakistan on the Grey List until February 2020.
  • In October, it had warned that Pakistan would be put on the Black List if it did not comply with the remaining 22 points in a list of 27 questions.
  • Pakistan is required to show effective implementation of targeted financial sanctions against all UN designated terrorists like Lashkar-e-Taiba founder Hafiz Saeed, Jaish-e-Muhammad founder Masood Azhar, and those acting for or on their behalf.

So, what is the FATF, and why is Pakistan under its scanner?

  • The FATF is an inter-governmental body that is now in its 30th year, working to “set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system”.
  • The FATF holds three Plenary meetings in the course of each of its 12-month rotating presidencies. The last FATF Plenary was held in Paris in October; the next one is scheduled in Beijing from January 21-24; the one after that will be held in June 2020.
  • Pakistan has been under the FATF’s scanner since June 2018, when it was put on the Grey List for terror financing and money laundering risks, after an assessment of its financial system and law enforcement mechanisms.
  • FATF and its partners such as the Asia Pacific Group (APG) are reviewing Pakistan’s processes, systems, and weaknesses on the basis of a standard matrix for anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.
  • In June 2018, Pakistan gave a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime, and to address its strategic counter-terrorism financing-related deficiencies.
  • Pakistan and the FATF then agreed on the monitoring of 27 indicators under a 10-point action plan, with specific deadlines.
  • The understanding was that the successful implementation of the action plan, and its physical verification by the APG, would lead the FATF to move Pakistan out of the Grey List.
  • However, Islamabad managed to satisfy the global watchdog over just five of them.
  • After an extension of the deadline for compliance, on December 6, Pakistan submitted a report to the FATF containing answers to the remaining 22 questions.
  • In response, the FATF’s Joint Group has now sent 150 questions to Pakistan, asking for clarifications, updates, and actions taken against the madrassas.

And what will happen now?

  • As of now, Pakistan must respond by January 8, 2020. And at the next FATF meeting in Beijing, Pakistan will have an opportunity to defend the points in the report.
  • Pakistan will likely ask for another relaxation of the deadline, probably up to June 2020, pleading that the February deadline is too tight for it to ensure compliance with the remaining 22 action plans.
  • If Pakistan is actually moved out of the Grey List, it will be placed on the Black List with Iran and North Korea.

Source:IE