Financial Action Task Force places Pakistan in Grey List for failing to curb terror financing

Crack down on terror financers!
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.

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.

Implications of being in the Grey List for Pakistan:

• It will endanger Pakistan’s handful of remaining banking links to outside world, causing real financial pain to its already 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).

What is 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.

Roles of FATF:

• Combating Money Laundering
• Stopping Terrorism Financing
• Fighting other threats to integrity of international financial system.
• Assess and monitor compliance with the FATF standards.
• Conducting studies of money laundering and terrorist financing methods, trends and techniques.
• Responding to new and emerging threats, such as proliferation financing used for promoting proliferation of nuclear, chemical and biological weapons.