Pakistan is off FATF's Grey List: What Does that Mean?

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In today's edition of our Current Affairs, we will discuss What Pakistan's removal from FATF grey list signifies. The topic's relevance to the UPSC CSE syllabus is mentioned below.

For Prelims: Financial Action Task Force (FATF), Inter-governmental body, FATF Recommendations, FATF Standards, Grey List, FATF Blacklist, member of the FATF.

For Mains: Significance of FATF, Expectations from the countries on the grey list, The repercussion of being on the Grey list, and Benefits After Removing a Country from FATF’S Grey List.

Context

Pakistan was the most important country on the Financial Action Task Force (FATF) grey list, but it (along with Nicaragua) was recently taken off the list, and 23 countries remain under watch. A development that has been welcomed across the country of Pakistan.

Probable Question

Explain the working and significance of the Financial Action Task Force (FATF).

About FATF

• The Financial Action Task Force (FATF) is commonly referred to as the world’s “terrorism financing watchdog”.
• Simply FATF is the author and custodian of an international regime, that prevents misuse of the flow of money in the global financial system for any terrorist activities.
• It is an inter-governmental body that works to: 
  • Set standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system.

• The FATF has developed the FATF Recommendations, or FATF Standards, which ensure a coordinated global response to prevent organized crime, corruption, and terrorism.
• With more than 200 countries and jurisdictions committed to implementing them.  

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Significance of FATF

• They help authorities go after the money of criminals dealing in illegal drugs, human trafficking, and other crimes.  
• The FATF also works to stop funding for weapons of mass destruction.
• The FATF reviews money laundering and terrorist financing techniques.
• It continuously strengthens its standards to address new risks, such as the regulation of virtual assets, which have spread as cryptocurrencies gain popularity.  
• The FATF monitors countries to ensure they implement the FATF Standards fully and effectively and holds countries to account that do not comply.

About the FATF’s Grey List

• The countries that are under the close watch of FATF come under its “grey list”. 
• The countries that failed to prevent international money laundering and terrorist financing, are, therefore, on a global watchlist for bad behavior.
• Countries in the Grey List: Philippines, Syria, Yemen, the United Arab Emirates (UAE), Uganda, Morocco, Jamaica, Cambodia, Burkina Faso, and South Sudan, and the tax havens of Barbados, Cayman Islands, and Panama.

Expectations from the Countries on the Grey List

• FATF calls these countries “jurisdictions under increased monitoring”. 
• These countries have to comply with certain conditions laid down by the FATF, failing which they run the risk of being “blacklisted” by the watchdog. 
• Their compliance is periodically reviewed by the FATF.
• According to the FATF, when jurisdiction is placed under increased monitoring, then the country has to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to extra checks.
• These jurisdictions are “actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing”.

Note: FATF Blacklist: This is also called FATF AML deficient list. A blacklisted country may be subject to economic sanctions by a member of the FATF.  Currently Korea, Iran, and Myanmar are the countries on the FATF Blacklist. Myanmar is the most recently added to the list.

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The Repercussion of being on the Grey List

• Grey-listing negatively impacts the relationship of the concerned countries with international funders.
• International banks and financial institutions take note of FATF rankings, as well as existing and potential overseas investors in those countries, and avoids assisting such countries.

Benefits After Removing a Country from FATF’S Grey List

• Once removed from the grey list, the country receives a reputational boost. 
• It also gets a clean bill of health from the international community on terrorist financing.

News Source: The Indian Express

https://indianexpress.com/article/explained/explained-global/pakistan-off-fatf-grey-list-what-this-means-8224280/

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