The FATF decision to retain Pakistan on the grey list came after the European Union expressed dissatisfaction with Pakistan’s progress. This decision came despite the fact that Pakistan made significant progress on 21 out of 27 point’s plan of FATF. All six remaining points related to the terror financing. FATF member states made unanimous decision in this regard.
Just before FATF’s plenary meeting from October 21-23, the EU had expressed dissatisfaction with Pakistan’s progress on FATF compliance during its last strategic dialogue with Pakistan on October 7. Not only that, it had opposed Pakistan’s exit from the grey list.
Important member states of the EU alliance, such as Belgium, Germany, UK and the Netherlands, took a hard stance against Pakistan, which reflects in the policy of the European Union.
The EU reviewed the progress made by Pakistan on the FATF’s recommendations and urged the country to fight terrorism, money laundering and financial terrorism — areas which comprise the remaining six conditions the country must comply with.
In the political dialogue on October 7, the EU had said Pakistan has to make important efforts to fulfill remaining objectives. In this regard, the EU encouraged Pakistan to double its efforts to implement the action plan and continue decisive action against terrorism financing and money laundering.
The following four areas of strategic deficiencies were identified in a statement issued following the FATF webinar:
Demonstrating that law enforcement agencies (LEAs) are identifying and investigating the widest range of terror financing activity (TF) and that TF investigations and prosecutions target designated persons and entities, and those acting on behalf or at the direction of the designated persons or entities.
Demonstrating Terror Financing prosecutions result in effective, proportionate and dissuasive sanctions.
Demonstrating effective implementation of targeted financial sanctions against all 1,267 and 1,373 designated terrorists and those acting for or on their behalf, preventing the raising and moving of funds including in relation to NPOs (non-profit organisations), identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services
Demonstrate to enforcement against TFS (terror financing sanctions) violations, including administrative and criminal penalties. And provincial and federal authorities cooperate on enforcement cases.
The FATF had placed Pakistan on the grey list in June 2018 and asked Islamabad to implement a plan of action to curb money laundering and terror financing by the end of 2019, but the deadline was extended later on due to the coronavirus pandemic.
The International Cooperation Review Group of the FATF has acknowledged that Pakistan had complied with 21 points of the action plan, the report said. The report said Pakistan is unlikely to exit FATF grey list, but the country has managed to avert being blacklisted.
The country has complied with the points related to money laundering. The remaining six points pertain to terrorism financing.
In February, the FATF gave Pakistan, which missed 13 targets, a four-month grace period to complete its 27-point action plan against money laundering and terror financing committed with the international community.
In its third plenary held virtually in June, the FATF decided to keep Pakistan in the grey list as Islamabad failed to check flow of money to terror groups like Lashkar-e-Taiba (LeT) and Jaish-e-Mohammed (JeM).
With Pakistan’s continuation in the ‘grey list’, it is increasingly becoming difficult for the country to get financial aid from the International Monetary Fund (IMF), World Bank, Asian Development Bank (ADB) and the European Union, thus further enhancing problems for the nation which is in a precarious financial situation.
In July, Pakistan’s Senate unanimously approved two bills related to the tough conditions set by the FATF. In August, Parliament’s lower house passed four FATF-related bills as part of the efforts by Pakistan to move from the FATF’s grey list to the white list.
In September, the joint session of the Parliament amended about 15 laws to upgrade its legal system matching international standards as required by the FATF.
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