What is FATF?
Financial Action Task Force (FATF), is an independent inter-governmental watchdog to combat global money laundering, terrorism financing and the financing of proliferation of weapons of mass destruction. It aims to prevent illegal practices in the international system by setting specific standards for states to follow. It was founded in 1989, by the Group of Seven (G7) countries in Paris, France where its headquarters are located. It comprises of 37 member jurisdictions and two regional organisations.
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The FATF has set forty recommendations for money laundering and nine special recommendations for terrorism financing. These recommendations are Anti-Money Laundering/Combating the Financing of Terrorism (AML\CFT) 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 has two lists. The FATF Blacklist (officially called “High-Risk Jurisdictions subject to a Call for Action”) is for “Non-Cooperative Countries or Territories” (NCCTs). Issued since 2000, the countries that fall under this list according to FATF standards are uncooperative with other jurisdictions in their efforts against money laundering and terrorism financing. As of 21 February 2020, Iran and North Korea are the only two countries FATF blacklist. Pakistan has never been on this list.
The other list is the FATF Greylist (officially called “Jurisdictions Under Increased Monitoring”). Unlike the blacklist list countries, these countries formally work with the FATF to develop action plans that will address their AML/CFT deficiencies.
Since 2000, Pakistan has been put under FATF’s greylist in 2008 and from 2012 to 2015. Pakistan was put into the list again in June 2018.
FATF set out ten objectives, within which it gave 27 key mandates or action plan items for Pakistan to fulfil in 2018. By February 2020, Pakistan fulfilled 13 out of 27 of these key mandates. FATF granted it a time period of four months to complete the plan, and this grace period was further extended due to the Corona Virus pandemic. Pakistan by October 2020 made progress and mostly addressed 21 of the 27 action items.
The four areas for improvement are:
- Demonstrating enforcement against TFS violations, including in relation to NPOs, of administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases.
- Demonstrating that law enforcement agencies are identifying and investigating the widest range of TF activity 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 that TF prosecutions result in effective, proportionate and dissuasive sanctions.
- Demonstrating effective implementation of targeted financial sanctions against all 1267 and 1373 designated terrorists and those acting for or on their behalf, preventing the raising and moving of funds including in relation to NPOs, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services.
FATF has strongly urged Pakistan to complete its full action plan by February 2021 swiftly. Pakistan will be re-evaluated at the FATF Plenary which would classify its position into its lists on the completion or failure to comply with the action plan items.