Financial Action Task Force Current Affairs - 2019

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FATF keeps Pakistan in Grey List for Failing to Stop Terror Financing

The Financial Action Task Force (FATF) condemning the Pulwama Terror Attack has decided to continue the ‘Grey’ listing of Pakistan for its failure to stop funding of terrorist groups such as Jaish-e-Mohammad, Lashkar-e-Taiba and Jamat-ud-Dawa.

Why FATF has decided to continue Pakistan in Grey List?

  • The statement issued by FATF states that Pakistan should continue to work on implementing its action plan to address its strategic deficiencies, including by adequately demonstrating its proper understanding of the terror financing risks posed by the terrorist groups and conducting supervision on a risk-sensitive basis.
  • FATF notes that even though Pakistan has revised its terror financing risk assessment, it does not reflect proper understanding of the TF risks posed by Da’esh (ISIS), AL-Qaida, JuD (Jamat-ud-Dawa), FIF (Falah-e-Insaniat Foundation), LeT (Lashkar-e-Taiba), JeM (Jaish-e-Mohammad), HQN (Haqqani Network) and persons affiliated with the Taliban.
  • Noting the limited progress on action plan items due in January 2019, FATF urged Pakistan to swiftly complete its action plan, particularly those with timelines of May 2019.

How the Grey Listing would impact Pakistan?

  • Grey list will endanger Pakistan’s handful of remaining banking links to the outside world. This would cause real financial pain to the fragile economy of Pakistan.
  • Grey listing will squeeze Pakistan’s economy and make it harder to meet its mounting foreign financing needs, including potential future borrowings from the International Monetary Fund (IMF).
  • Grey listing would also lead to the downgrading of Pakistan’s debt ratings by international banking and credit rating agencies, making it more difficult to tap funds from international bond markets.
  • It will also suspend international funds and aid to Pakistan such as Coalition Support Funds (CSF), money which the US owes to Pakistan for military operations.

Grey Listing will also lessen investors confidence in Pakistan and impacts its imports and exports, widening its existing huge current account deficit (CAD).

 

Month: Categories: InternationalUPSC

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Financial Action Task Force places Pakistan in Grey List for failing to curb terror financing

The Financial Action Task Force (FATF) at its plenary meeting in Paris, France has officially placed Pakistan on its Grey List of countries involved in providing monetary assistance to terrorism and related causes for failing to curb terror financing on its soil. FATF also has laid out 10-point action plan for Pakistan for compliance with its guidelines. If Pakistan fails in implementing the elaborate action plan, it may result in being included in FAFT’s Black List in 2019. This will be second time Pakistan has been grey listed by FATF, for first time it was placed in the list for three years from 2012 to 2015.

Impact of Grey-listing

It will endanger Pakistan’s handful of remaining banking links to outside world, causing real financial pain to its fragile economy. It will squeeze Pakistan’s economy and make it harder to meet its mounting foreign financing needs, including potential future borrowings from International Monetary Fund (IMF). It will lead to downgrading of Pakistan’s debt ratings by international banking and credit rating agencies, making it more difficult to tap funds from international bond markets. It will also suspend international funds and aid to Pakistan such as Coalition Support Funds (CSF), money which US owes to Pakistan for military operations. It will lessen investors’ confidence in Pakistan and also impacts its imports and exports, widening its existing huge current account deficit (CAD).

Financial Action Task Force (FATF)

FATF is an inter‐governmental policy making body that aims to establish international standards for combating money laundering and terrorist financing. It was established in 1989 during the G7 Summit in Paris (France) to combat the growing problem of money laundering.

It comprises over 39 member countries including India. FATF Secretariat is housed at headquarters of OECD in Paris, France. Initially, FATF was only dealing with developing policies to combat money laundering. But in 2001 its purpose was expanded to act against terrorism financing.

Mandate

FATF sets standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to integrity of international financial system.

Functions

  • Sets international standards to combat money laundering and terrorist financing.
  • Assess and monitor compliance with the FATF standards.
  • Conducts studies of money laundering and terrorist financing methods, trends and techniques.
  • Responds to new and emerging threats, such as proliferation financing used for promoting proliferation of nuclear, chemical and biological weapons.

Month: Categories: International

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