Established in 1989, the Financial Action Task Force (FATF) is an intergovernmental organization whose primary objective is to combat money laundering and terrorist financing. The FATF is responsible for setting international standards for combating money laundering and terrorist financing, and it conducts periodic reviews of member countries to ensure compliance with these standards. Pakistan has been on the FATF’s radar for several years due to concerns about its compliance with these standards. In this article, we will provide a detailed, chronological account of the FATF’s interactions with Pakistan.
In 2018, the FATF placed Pakistan on its “grey list” of countries with deficiencies in their anti-money laundering and counter-terrorist financing (AML/CTF) regimes. The move was a result of concerns about Pakistan’s lack of progress in addressing terrorist financing and money laundering risks. The FATF identified several specific deficiencies in Pakistan’s AML/CTF regime, including a lack of effective implementation of targeted financial sanctions against terrorist groups and their facilitators, a lack of enforcement action against illegal money transfer services, and insufficient oversight of non-profit organizations.
Following Pakistan’s placement on the grey list, the country’s government began to take steps to address the FATF’s concerns. In June 2018, the government launched a National Action Plan to combat money laundering and terrorist financing. The plan included measures to improve the capacity of law enforcement agencies to investigate and prosecute money laundering and terrorist financing cases, strengthen the regulatory framework for non-profit organizations, and enhance cooperation with international partners.
In October 2019, the FATF reviewed Pakistan’s progress in addressing the deficiencies in its AML/CTF regime. While acknowledging that Pakistan had made progress in some areas, the FATF expressed concerns about the country’s continued failure to fully implement targeted financial sanctions against terrorist groups and their facilitators, and the lack of effective prosecution of money laundering and terrorist financing cases. As a result, the FATF decided to keep Pakistan on the grey list and urged the country to take further action to address the outstanding deficiencies.
In February 2020, the FATF again reviewed Pakistan’s progress and found that the country had made significant progress in addressing the deficiencies in its AML/CTF regime. The FATF noted that Pakistan had taken steps to improve its legal and regulatory framework for AML/CTF, had increased the number of investigations and prosecutions of money laundering and terrorist financing cases, and had improved its cooperation with international partners. However, the FATF also identified several areas where further progress was needed, including the full implementation of targeted financial sanctions against terrorist groups and their facilitators, and the effective prosecution of money laundering and terrorist financing cases.
In June 2020, the FATF decided to keep Pakistan on the grey list and urged the country to take further action to address the remaining deficiencies in its AML/CTF regime. The FATF specifically called on Pakistan to demonstrate effective implementation of targeted financial sanctions against terrorist groups and their facilitators, and to demonstrate that it was effectively prosecuting money laundering and terrorist financing cases.
In October 2020, the FATF again reviewed Pakistan’s progress and found that the country had made significant progress in addressing the remaining deficiencies in its AML/CTF regime. The FATF noted that Pakistan had demonstrated effective implementation of targeted financial sanctions against terrorist groups and their facilitators, had increased the number of investigations and prosecutions of money laundering and terrorist financing cases, and had improved its cooperation with international partners. As a result, the FATF decided to keep Pakistan on the grey list but acknowledged the country’s progress and expressed its confidence that Pakistan would continue to make progress in addressing the remaining deficiencies.
In February 2021, the FATF again reviewed Pakistan’s progress and found that the country had made further progress in addressing the remaining deficiencies in its
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AML/CTF regime. The FATF noted that Pakistan had continued to demonstrate effective implementation of targeted financial sanctions against terrorist groups and their facilitators, had increased the number of prosecutions and convictions for money laundering and terrorist financing, and had enhanced its cooperation with international partners. The FATF also recognized Pakistan’s commitment to continue strengthening its AML/CTF regime and addressing the remaining deficiencies.
Despite the progress made by Pakistan, the FATF has continued to express concerns about the country’s AML/CTF regime. In particular, the FATF has identified the need for Pakistan to take further steps to investigate and prosecute terrorism financing cases, and to strengthen its supervision of designated non-financial businesses and professions. The FATF has also called on Pakistan to address its ongoing deficiencies in the areas of international cooperation and the implementation of targeted financial sanctions against terrorist groups and their facilitators.
The FATF’s ongoing concerns about Pakistan’s AML/CTF regime have significant implications for the country’s economy and international standing. Being on the FATF’s grey list can make it more difficult for Pakistan to access international finance and can lead to increased scrutiny of its financial transactions. The grey list status can also damage Pakistan’s reputation and undermine its efforts to attract foreign investment.
In conclusion, Pakistan has been on the FATF’s grey list since 2018 due to concerns about its compliance with international AML/CTF standards. While Pakistan has made significant progress in addressing the deficiencies in its AML/CTF regime, the FATF continues to call on the country to take further action to strengthen its supervision of designated non-financial businesses and professions, investigate and prosecute terrorism financing cases, and implement targeted financial sanctions against terrorist groups and their facilitators. The FATF’s ongoing scrutiny of Pakistan’s AML/CTF regime highlights the importance of strong international cooperation and effective implementation of AML/CTF measures in the fight against money laundering and terrorist financing.
The outcomes of the FATF Plenary held on 20-21 October 2022 reveal that the organization acknowledges and welcomes Pakistan’s significant progress in enhancing its AML/CFT regime. Pakistan has taken steps to strengthen the effectiveness of its AML/CFT regime and address technical deficiencies to fulfill the commitments of its action plans regarding strategic deficiencies identified by the FATF in June 2018 and June 2021. Pakistan has completed all 34 action items ahead of the deadlines, thereby fulfilling its obligations.
As a result, Pakistan has been removed from the FATF’s increased monitoring process.
Pakistan remains committed to working with the APG to further enhance its AML/CFT system.
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