Terrorism and Challenges Related To It

Pakistan is out of FATF ‘Grey List’ on terror funding

Note4Students

From UPSC perspective, the following things are important :

Prelims level : FATF

Mains level : Terror financing and money laundering

Global terror-financing watchdog FATF has announced Pakistan‘s removal from its grey list, saying the country has largely completed its action plans on anti-money laundering and financing of terrorism.

What is the FATF?

  • FATF is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
  • The FATF Secretariat is housed at the OECD headquarters in Paris.
  • It holds three Plenary meetings in the course of each of its 12-month rotating presidencies.
  • As of 2019, FATF consisted of 37 member jurisdictions.

India’s say in FATF

  • India became an Observer at FATF in 2006. Since then, it had been working towards full-fledged membership.
  • On June 25, 2010, India was taken in as the 34th country member of FATF.

EAG of FATF

  • The EAG is a regional body comprising nine countries: India, Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan and Belarus.
  • It is an associate member of the FATF.

What is the role of FATF?

  • The rise of the global economy and international trade has given rise to financial crimes such as money laundering.
  • The FATF makes recommendations for combating financial crime, reviews members’ policies and procedures, and seeks to increase the acceptance of anti-money laundering regulations across the globe.
  • Because money launderers and others alter their techniques to avoid apprehension, the FATF updates its recommendations every few years.

What is the Black List and the Grey List?

  • Black List: The blacklist, now called the “Call for action” was the common shorthand description for the FATF list of “Non-Cooperative Countries or Territories” (NCCTs).
  • Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.

Consequences of being in the FATF grey list:

  • Economic sanctions from IMF, World Bank, ADB
  • Problem in getting loans from IMF, World Bank, ADB and other countries
  • Reduction in international trade
  • International boycott

How had it impacted Pakistan economically?

  • A country on the ‘grey list’ is not subject to sanctions.
  • However, the ‘grey list’ signals to the international banking system that there could be enhanced transaction risks from doing business with the said country.
  • In 2018, the Economist noted that there had been no direct economic implications when Pakistan was on the grey list from 2012 to 2015.
  • Instead, Pakistan managed to obtain a $6 billion bailout package from IMF in 2013 and raise additional funding in global debt markets in 2015.

Pakistan claimed the politicization of FATF. Is that true?

  • In the run-up to the February 2018 decision, the US had weaned Saudi Arabia away, leaving only China and Turkey supporting Pakistan.
  • China eventually withdrew its objection.
  • A few days later, India publicly congratulated China for its election as vice president of FATF, lending credence to the speculation that a deal had been reached behind closed doors.

How Pakistan managed to get out of the ‘inglorious’ list?

fatf

  • Removal from the list mark the culmination of a four-year reform process that has required far-reaching changes to Pakistan’s financial system.
  • It appears that, Pakistan has performed well in particular to laws governing money laundering and terrorism financing.
  • Pakistan was given an action plan by FATF in 2018 to address strategic counter-terrorist financing-related deficiencies.

Conclusion

  • This is not the first time for Pakistan to exit Grey List. It has been swinging on its position on terror financing.
  • Pakistan first figured in a FATF statement after the plenary of February 2008.

 

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