Pakistan Removed from FATF Grey List

• 28 Oct 2022

For Prelims: FATF, Grey List, Black List, G7, OECD, European Commission, Gulf Cooperation Council

For Mains: FATF - Grey List and Black List, Efficiency of FATF in combatting terrorism and money laundering, Pakistan’s removal from FATF Grey List and its implications on India

Why in News?

Recently, the Financial Action Task Force (FATF), the international watchdog on terror financing and money laundering, has removed Pakistan from the list of countries under “increased monitoring” (Grey List).

• India’s other neighbour on the grey list, Myanmar, was moved to the “black list” due to actions by the military leadership after the 2021 coup.

What is the FATF?

• About:
  • FATF is the global money laundering and terrorist financing watchdog. It also aims to counter the financing of proliferation of weapons of mass destruction.
  • It was set up in 1989 out of a G-7 meeting of developed nations in Paris.
  • Its Secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris.
• Members:
  • As of today, it is a 39-member body with 37 countries and two regional organisations: the European Commission, and the Gulf Cooperation Council.
    • Indonesia is the only observer country of FATF.
  • India joined with ‘observer’ status in 2006 and became a full member of FATF in 2010.
    • India is also a member of its regional partners, the Asia Pacific Group (APG) and the Eurasian Group (EAG).
• Greylisting and Blacklisting Countries:
  • The FATF Plenary (decision-making body of the FATF) meets tri-annually - in February, June and October, to take stock of “Mutual Evaluation Reports” (MERs) of the countries it reviews.
  • If a country appears to have major deficiencies in its AML/CFT regime, it is put on a list of “jurisdictions under increased monitoring” - “grey list” and if it fails to address FATF concerns, it is put on a “high-risk jurisdictions” list - “black list”.
    • AML/CFT refers to “Anti-Money Laundering/Combating the Financing of Terrorism”.
  • The Grey List includes countries that are considered safe haven for supporting terror funding and money laundering. It serves as a warning that the country may enter the blacklist.
    • The Black List includes Non-Cooperative Countries or Territories (NCCTs) that support terror funding and money laundering activities. As of now, Iran, North Korea and Myanmar are the three black listed countries.
  • The enlisted countries are subjected to increased financial structures, thus making it difficult for them to procure loans from the financial institutions affiliated to FATF (as observers) such as the IMF, World Bank etc.

What are the Key Points about Pak’s Removal from the Grey List?

• FATF’s Stand: The FATF lauded “Pakistan’s significant progress” saying that the country had completed two action plans comprising a 34-point tasklist in the period since 2018.
  • Pakistan has been removed from the list after four years. It was first put on the list in 2008, removed in 2009 and before adding it again in 2018, it remained under increased monitoring from 2012 to 2015.
• India’s Response: India has protested Pakistan’s lack of action against cross-border terror groups responsible for attacks on India, however, it agreed to the decision to take Pakistan off the list, as the latter had submitted “documentary evidence” of its actions against designated terrorists.
  • India believes that Pakistan must continue to take “credible, verifiable, irreversible and sustainable” action against terror groups emanating from territories under its control.

What are the Implications of Removing Pakistan from the List?

• For Pakistan: Being removed from the grey list, Pakistan has essentially received a reputational boost and a clean bill of health from the international community on terrorist financing.
  • Considering the current situation of the country’s economy, it is essentially in desperate need of investments from other countries. Removal from the grey list will definitely do the deed in this context.
• For India: While four years of greylisting has scaled-down the cross-border terror, the occasional incidents of terrorists infiltration and the regular sightings of drones bearing weapon-payloads along the border suggest that Pakistan’s terrorism infrastructure directed against India is presently in a recessed mode but far from being dismantled comprehensively.
  • India will have to continue mustering all available instruments and options to deny Pakistan operating space to wield the terror-weapon.
  • India’s interests lie in playing the long game in these diplomatic battles with the goal of making the region more stable and secure.

Source: IE