Grey List Current Affairs - 2019

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Sri Lanka removed from FATF’s Grey List

Sri Lanka has been removed from ‘Grey List’ of Financial Action Task Force (FATF) following the new measures taken by the country on financial security. The word ‘Grey List’ identified by FATF refers to a jurisdiction with strategic Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) deficiencies.

Key Highlights

The announcement regarding removal of Sri Lanka’s name from the list of countries at risk for money laundering was made by Sri Lankan Minister of Finance Mangala Samaraweera, after a 5-day FATF plenary concluded in Paris, France.

FATF, the international terror financing watchdog, noted that Sri Lanka set out a sound framework to bring the commitment of all stakeholders for enhancing AML/CFT standards in order to improve compliance and country rating.

Background

Sri Lanka was first included in FATF’s blacklist in 2011, and by 2012, Sri Lanka was listed in the list as a dangerous country with no commitment to financial security plan.

Later in October 2016, FATF subjected Sri Lanka to a review of FATF’s International Cooperation Review Group (ICRG) for assessing the progress of AML/CFT effectiveness in country.

However, since 2016, Sri Lankan government together with country’s Central Bank and other financial institutions has taken several measures to ensure the financial security of country. As a result these efforts, Sri Lanka was declared a cooperating state in 2016 and FATF putted Sri Lanka on its grey list from November 2017. The island nation has reported the progress achieved in the implementation of action plan regularly to FATF.

What is Financial Action Task Force (FATF)?

It is a Paris (France) based inter-governmental organisation established in 1989.

It is the international terror financing watchdog that combats terrorist financing, money laundering as well as other related threats to integrity of international financial system.

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).