Published: 19th Oct, 2020
Context
Noting that Pakistan's measures against money laundering and terror financing "is not yet sufficient to justify a re-rating", a regional affiliate of the Financial Action Task Force retained the country on its ''Enhanced Follow-up'' list.
About
What is Enhanced follow-up list?
- ''Enhanced follow-up'' is an intensive process of correction that deals with members with significant deficiencies (for technical compliance or effectiveness) in their AML/CFT systems.
- The list concluded that Pakistan’s progress on the 40 FATF recommendations on the effectiveness of anti-money laundering and combating financing terror (AML/CFT) system largely remained unchanged from a year before.
- While Pakistan was found to be “partially compliant" on 25 of 40 recommendations, it was found to be “non compliant" on four, “largely compliant" on nine parameters and “fully complaint" on one.
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About FATF
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Background
- FATF had placed Pakistan on its 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 COVID-19 pandemic.
- Seeking to wriggle out of the FATF's grey list, debt-ridden Pakistan in August imposed financial sanctions on 88 banned terror groups and their leaders, including 26/11 Mumbai attack mastermind and Jamaat-ud-Dawa (JuD) chief Hafiz Saeed, Jaish-e-Mohammed (JeM) chief Masood Azhar and underworld don Dawood Ibrahim.
- In February, the FATF gave Pakistan, which missed 13 targets, a four-month grace period to complete its 27-point action plan against ML&TF 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).
The APG Evaluation
- The APG Mutual Evaluations is a peer-review system to determine whether countries meet the compliance standards for money laundering and terror financing.
- After a country submits a Mutual Evaluation report, APG members can decide to place a member either through regular or enhanced follow-up.
- While a regular follow-up means just biennial reports, a country put under enhanced follow-up has to send four reports of compliance the following year.
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Asia/Pacific Group on Money Laundering (APG)
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Impact of Continuation
- Continuation on the “gray list" means it becomes increasingly difficult for the countries to get financial aid from the International Monetary Fund (IMF), World Bank, Asian Development Bank (ADB) and the European institutions.
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