Pakistan remains on FATF Grey List, will have to take foreign assistance to combat terror financing, money laundering

Pakistan will remain on the “Grey List” of the Financial Action Task Force (FATF), as its government led by Prime Minister Imran Khan could not yet fully meet the expectation of the intergovernmental organizations on plugging loopholes in its legal mechanism to detect and stop the flow of funds to terrorist organizations.

The Khan government will now also have to accept assistance from foreign nations for effective implementation of targeted financial sanctions against individuals and entities designated as terrorists and terrorist organizations by the United Nations Security Council, like Masood Azhar, Zaki ur Rahman Lakhvi and Dawood Ibrahim.

The FATF, which held its plenary this week, noted that the Government of Pakistan had made progress in implementing 26 of the 27 measures prescribed to it in 2018 by the intergovernmental organisation set up to coordinate global efforts to check the flow of funds to terrorist organizations and money laundering.

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Pakistan is now expected to be taken off the “Grey List” of the FATF, if and when it would be able to demonstrate that investigations by its law-enforcing agencies into alleged cases of financing terror and prosecutions indeed targetted senior leaders and commanders of the terrorist groups the United Nations placed under curbs.

The FATF had in 2018 put Pakistan in its “grey-list” – officially a list of “jurisdictions with strategic deficiencies in its legal regime to check money laundering and terrorist financing”. The Government of Pakistan and the FATF had by June 2018 agreed on an action to plug the loopholes. The intergovernmental organization had on February 2021 decided to give the Khan government in Islamabad time till June 2021 to implement the three remaining measures.

The review by the FATF this week found that the Government of Pakistan had now implemented all measures but one.

“The FATF encourages Pakistan to continue to make progress to address as soon as possible the one remaining CFT (Counter Financing Terror) related item by demonstrating that TF (Terror Financing) investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups,” Marcus Pleyer, president of the intergovernmental organization, said after the plenary came to its end.

The Asia Pacific Group on Money Laundering had a separate mutual evaluation on Pakistan in 2019. It found additional deficiencies in Pakistan’s legal mechanism to stop money laundering.

The FATF noted that Pakistan had now made progress to address a number of the recommended actions in the 2019 Mutual Evaluation Report. The Khan government had provided a further high-level commitment to the FATF to address the strategic deficiencies pursuant to a new action plan that primarily focused on combating money laundering. “Pakistan should continue to work to address its strategically important AML/CFT (Anti Money Laundering / Counter Financing of Terror) deficiencies, by enhancing international cooperation by amending the Mutual Legal Assistance law and by demonstrating that assistance was being sought from foreign countries in implementing UNSCR 1373 designations on terrorists.