Pakistan stays on FATF's 'grey-list', UAE added

Pakistan will continue to stay in the Financial Action Task Force’s (FATF) increased monitoring list, also known as the grey-list, it was announced after the FATF Plenary held from March 1 to 4.

"Since June 2018, when Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime and to address its strategic counter-terrorist financing-related deficiencies, Pakistan’s continued political commitment has led to significant progress across a comprehensive CFT action plan," it said in the statement.

"Pakistan has completed 26 of the 27 action items in its 2018 action plan. The FATF encourages Pakistan to continue to make progress to address, as soon as possible, the one remaining item by continuing to demonstrate that TF investigations and prosecutions target senior leaders and commanders of UN designated terrorist groups."

The FATF plenary added that in response to additional deficiencies later identified in Pakistan’s 2019 APG Mutual Evaluation Report (MER), in June 2021, Pakistan provided further high-level commitment to address these strategic deficiencies pursuant to a new action plan that primarily focuses on combating money laundering.

"Since June 2021, Pakistan has taken swift steps towards improving its AML/CFT regime and completed 6 of the 7 action items ahead of any relevant deadlines expiring, including by demonstrating that it is enhancing the impact of sanctions by nominating individuals and entities for UN designation and restraining and confiscating proceeds of crime in line with Pakistan’s risk profile. Pakistan should continue to work to address the one remaining item in its 2021 action plan by demonstrating a positive and sustained trend of pursuing complex ML investigations and prosecutions."

Under the German Presidency of Dr Marcus Pleyer, delegates representing 206 members of the Global Network and observer organisations, including the International Monetary Fund (IMF), the United Nations and the Egmont Group of Financial Intelligence Units, took part in the FATF Plenary.

All FATF technical requirements met: FO

The event took place in a hybrid format with a significant number of participants attending in person due to the gradual easing of COVID-19 related restrictions in many countries.

FATF adds UAE to 'grey' money laundering watchlist

Meanwhile, FATF also added the United Arab Emirates to its "grey" watchlist.

Looming FATF decision on dirty money list poses risks for UAE

"In February 2022, the UAE made a high-level political commitment to work with the FATF and MENAFATF to strengthen the effectiveness of its AML/CFT regime," read the statement on the UAE.

"Since the adoption of its MER in February 2020, the UAE has made significant progress across its MER’s recommended actions to improve its system, including by finalising a TF Risk Assessment, creating an AML/CFT coordination committee, establishing an effective system to implement targeted financial sanctions without delay, and significantly improving its ability to confiscate criminal proceeds and engage in international cooperation.

"Additionally, the UAE addressed or largely addressed more than half of the key recommended actions from the MER.

"The UAE will work to implement its FATF action plan by: (1) demonstrating through case studies and statistics a sustained increase in outbound MLA requests to help facilitate investigation of TF, ML, and high-risk predicates; (2) identifying and maintaining a shared understanding of the ML/TF risks between the different DNFBP sectors and institutions; (3) showing an increase in the number and quality of STRs filed by FIs and DNFBPs; (4) achieving a more granular understanding of the risk of abuse of legal persons and, where applicable, legal arrangements, for ML/TF; (5) providing additional resources to the FIU to strengthen its analysis function and enhance the use of financial intelligence to pursue high-risk ML threats, such as proceeds of foreign predicate offenses, trade-based ML, and third-party laundering; (6) demonstrating a sustained increase in effective investigations and prosecutions of different types of ML cases consistent with UAE’s risk profile; and (7) proactively identifying and combating sanctions evasion, including by using detailed TFS guidance in sustained awareness-raising with the private sector and demonstrating a better understanding of sanctions evasion among the private sector," added the statement on UAE.

Countries on the ‘grey list’ face increased FATF monitoring and risk reputational damage, ratings adjustments, trouble obtaining global finance and higher transaction costs, experts say. UAE Minister of State Ahmed al-Sayegh had earlier said the risk from a potential greylisting to sectors such as banking, real estate and credit ratings was “generally low”.

Also read: Pakistan’s long FATF ordeal

Background

Pakistan was placed on FATF's grey-list for deficiencies in its counter-terror financing and anti-money laundering regimes in June 2018.

In October 2021, the FATF plenary had announced that Pakistan will continue to stay in the increased monitoring list.

Back then, Pakistan had made progress in complying with FATF regulations and completed 30/34 action items. The FATF president had stated that Pakistan has shown high-level political commitment and completed a substantial part of its action items.

In June 2021, Pakistan had completed 26 out of the 27 action items in its 2018 action plan.

How to be removed from FATF's increased monitoring list

In order to be removed from FATF monitoring, a jurisdiction must address all or nearly all the components of its action plan.

Once the FATF has determined that a jurisdiction has done so, it will organise an on-site visit to confirm that the implementation of the necessary legal, regulatory, and/or operational reforms is underway and there is the necessary political commitment and institutional capacity to sustain implementation.

If the on-site visit has a positive outcome, the FATF will decide on removing the jurisdiction from public identification at the next FATF plenary. The concerned jurisdiction will then continue to work within the FATF or the relevant FSRB, through its normal follow-up process, to improve its AML/CFT regime.