Money Laundering Current Affairs - 2020

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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.


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.


  • 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.

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Pakistan named among top 3 sources for money laundering in UK

United Kingdom’s National Crime Agency (NCA) in its report has listed Pakistan among top three sources for money laundering in the country. The other two countries are Nigeria and Russia. The NCA is non-ministerial UK government law enforcement agency.

Key Highlights of NCA report

UK is prime destination for foreign corrupt and politically exposed people (PEPs) to launder money. It has identified trade misinvoicing as one of the key mechanisms used for such operations. Investment in UK property, particularly in London, continues to be attractive mechanism to launder funds.

The true scale of PEPs’ investment in UK is not known, however source countries that are most commonly seen are Russia, Nigeria and Pakistan. Small number of UK-based professional enablers, such as accountants, solicitors, estate agents and trust and company service providers, assist such corrupt individuals in laundering their money.

The overseas jurisdictions that have most enduring impact on UK across majority of different money laundering threats are Russia, China, Hong Kong, Pakistan, and United Arab Emirates (UAE). Some of these jurisdictions have large financial sectors which also make them attractive as destinations or transit points for proceeds of crime.

There may be also increase in Brexit-related spike in corrupt activities between UK and countries outside European Union (EU). Due to this, UK businesses will come into contact with corrupt markets, particularly in developing world, raising risk they will be drawn into corrupt practices.

Trade misinvoicing

It is a form of trade-based money laundering.  It is deliberately misreporting value of commercial transaction on invoice submitted to customs officials. This practice is adopted by traders to transfer money illicitly to foreign countries or in other words to keep their money in foreign accounts. It is largest component of illicit financial outflows measured by Global Financial Integrity.

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