FATF issues steps Pakistan need to get out of Grey List

The Financial Action Task Force (FATF) has chalked out an implementation plan for Pakistan, which it will need to address its strategic counter-terrorist financing-related deficiencies.

Pakistan has been placed on the ‘grey list’ by FATF on June 27. This means that the country's financial system will be designated as posing a risk to the international financial system because of 'strategic deficiencies' in its ability to prevent terror financing and money laundering.

After being placed on the 'grey list', Pakistan will be directly scrutinised by FATF until it is satisfied by the measures taken to curb terror financing and money laundering. “Pakistan will work to implement its action plan to accomplish these objectives,” reads FATF statement.

FATF has issued an action plan to curb terror financing and money laundering. In the first step, Pakistan has to demonstrate that terrorist financing risks are properly identified, assessed, and that supervision is applied on a risk-sensitive basis. The country has to demonstrate that remedial actions and sanctions are applied in cases of AML/CFT (Anti-Money Laundering/ Combating the Financing of Terrorism) regime violations, and that these actions have an effect on AML/CFT compliance by financial institutions.

It needs to demonstrate that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services (MVTS).

The Islamabad authorities are identifying cash couriers and enforcing controls on illicit movement of currency and understanding the risk of cash couriers being used for terrorist financing (TF). It should also improve the inter-agency coordination including between provincial and federal authorities on combating terrorist financing risks.

Furthermore, Pakistan needs to demonstrate that law enforcement agencies are identifying and investigating the widest range of terrorist financing activity and that TF investigations and prosecutions target designated persons and entities, and persons and entities acting on behalf or at the direction of the designated persons or entities.

“Demonstrating effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services,” the statement added.

In its last points, FATF has suggested that Pakistan needs to demonstrate enforcement against TFS (targeted financial sanctions) violations. This includes administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases. It also need to demonstrate that facilities and services owned or controlled by designated persons are deprived of their resources and the usage of the resources.