The Financial Action Task Force, also known by its French name, Groupe d’action financiers is a institution established by the G-7 Summit that was held in Paris in 1989.
One of the main objectives of the FATF is to establish norms and standards of “legal, regulatory and operational measures” to fight against money laundering, terrorist financing and other related threats to the security and integrity of the international financial system.
FATF also provides policy recommendations that meet international standards to countries for combating “money laundering and the financing of terrorism and proliferation of weapons of mass destruction
Pakistan has been under the FATF’s scanner since June 2018, when it was put on the greylist for terror financing and money laundering risks, after an assessment of its financial system and law enforcement mechanisms.
At its meeting in Canberra, where discussions were held for over seven hours spread over two days, the APG found Pakistan non-compliant on 32 of the 40 ‘compliance parameters’ of terror financing and money laundering, the PTI report said. It also said that Pakistan had failed 10 out of the 11 ‘effectiveness parameters’.
June 2018, Pakistan gave a high-level political commitment to work with the FATF and APG to address its strategic counter-terrorism financing-related deficiencies.
There is a distinct possibility, therefore, that a formal announcement of Pakistan’s blacklisting will be made at the FATF’s Paris Plenary in October.
India is a voting member of both the FATF and the APG, and co-chair of the Joint Group, where it is represented by the Director General of India’s Financial Intelligence Unit (FIU).
Pakistan had asked for India’s removal from the group, citing bias and motivated action, but that demand was rejected.
India was not part of the group that had moved the resolution to greylist Pakistan last year in Paris. The movers were the US, UK, France, and Germany. China did not oppose the move then.
How Pakistan will be affected:
- Pulling out of international financial institutions – Pakistan’s economy is primarily controlled by multinational banks. After being in the blacklist, these international financial institutions will pull out from Pakistan. The effect will be on the investors too who are dependent upon these banks. They may prematurely liquidate their investments to move on for better international options.
- all the transactions with Pakistan will involve more and more levels of scrutiny. As a result, the financial institutions will avoid transactions in highly transferable currency USD, Euro, etc As a result, foreign remittance will decrease.
- With a decrease in foreign currency transactions, the entire economy will be dependent upon Pakistani Rupee which is fighting for its survival and has depreciated massively in last one year.
- As a result of investors pulling out, the Pakistan stock market will fall
- Syria who was on the Blacklist of FATF in 2011. It resulted in high inflation rates which triggered a civil war in the country. Pakistan being a nuclear state and its Army is predominantly driven by religious sentiments, a major catastrophe can happen.
- Immediate stopping of all the aid from ADB(Asian development Bank) & other financial institutions. Even humanitarian aids will stop. no country including China will try to support Pakistan financially. This means whatever they buy has to be paid for in advance.
- International boycotting– When we see the example of North Korea (DPRK) & Iran, we see that after getting blacklisted in 2016, these two countries have been totally boycotted by the international community. Pakistan is on the verge of an international boycott now. This will result in economic isolation.
- both financial as well as diplomatic credibility and goodwill of Pakistan is now at stake. This will also effect its citizen staying in different parts of the world.
- most of the organisations of the world put trade barriers on the countries blacklisted by FATF. such trade barriers will finish the export instead of increasing it.
- Pakistan may resort to nuclear blackmailing – This will be a serious concern and UNSC as well as international watchdogs should and will take due cognizance of this matter.
Pakistan now has a full year to come out of Blacklist but the tasks to be performed in this one year are near impossible to execute.
NowPakistan has to decide for itself, what it will concentrate on – A Kashmir rhetoric or actual cracking down on terrorist organisations. There is a high risk of country going into civil war and other catastrophe. Pakistan PM had set a black DP in protest of Article 370 abrogation, now his country’s future is at the verge of getting blacklisted. Pakistan has already faced humiliation on spreading a fake news that Srilanka is backing them in Kashmir issue when Sri Lankan official statement made it clear that Kashmir is India’s internal matter. Imran must act fast and hard to save his country now.
Dr Sindhu Prashanth