What is FATF Grey List ?

It is a sort of punitive list by the Financial Action Task Force. Countries put on this list face financial restrictions. FATF is an Inter-Governmental body, established in 1989. Money Laundering and Terror Financing are main targets of FATF. India is a member

Apr 8, 2021 - 22:59

The Financial Action Task Force (FATF), after its 5-day plenary (concluded on 19th  October 019 in Paris), decided to keep Pakistan on the Grey List. However, it has warned that Pakistan will be put on the Black List if it does not control terror funding by February 2020. It has been reported that the immediate blacklisting of Pakistan did not garner the consensus of all FATF members. India led a diplomatic offensive against Pakistan for its blacklisting. France, the US and the European Union countries supported India. China, Turkey and Malaysia resisted India’s efforts.

Financial Action Task Force

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 during the G7 Summit in Paris.

The objectives of the FATF are 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.

Its Secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris.

Member Countries: As of 2019, it consists of thirty-seven member jurisdictions. India is one of the members.

FATF has two lists:

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.

Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put on the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.

The FATF Plenary is the decision making body of the FATF. It meets three times per year.

FATF & Pakistan

Pakistan was placed on the grey list by the FATF in June 2018 and was given a plan of action to complete by October 2019 or face the risk of being placed on the blacklist with Iran and North Korea.

Pakistan was previously placed on the FATF's grey list in February 2012 and had been removed from the grey list in February 2015 after it passed a National Action Plan (NAP) to deal with terrorism after the Peshawar school massacre in December 2014.

It was placed under severe restrictions in the years 2008-2012.

FATF’s latest Review of Pakistan

Pakistan addressed only 5 of the 27 tasks given to it to control funding to terror groups like the Lashkar-e-Taiba and Jaish-e-Mohammad — both responsible for a series of attacks in India. The FATF noted the insufficiency of Pakistan’s implementation as a “serious concerns”. The latest decision to keep the country on the ‘Grey List’ means that Pakistan has been given time until February 2020 to fulfil its commitments or risks of being blacklisted. The main purpose behind the decision is to not punish rather than incentivise, to make the required changes and make them faster.

Impact on Pakistan:

By remaining on the “Grey List”, it would be difficult for Pakistan to get financial aid from the International Monetary Fund (IMF), World Bank and European Union, making its financial condition more precarious. However, there are no immediate implications for the recent $6 billion loan negotiated with the IMF that is to be disbursed over the next three years. The country is facing a number of economic challenges with its economy expected to grow at 3.3 % in 2019 and 2.6% in 2020, according to IMF. Inflation is set to touch 7.3% in 2019, up from 3.9% in 2018, and rise to 13% in 2020. The fiscal deficit is projected at 7.1% of GDP in 2020, the highest in the last seven years.

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