FATF grey list: Pakistan bankers say terror financing watchdog’s demands must be met

Bankers in Pakistan believe further degradation by FATF could put the country’s economy under serious threat.

FATF grey list: Pakistan bankers say terror financing watchdog’s demands must be met

The FATF decision on Pakistan was taken at its plenary meet in Paris. (Photo: fatf-gafi.org)

With the Financial Action Task Force (FATF) deciding to keep Pakistan on its ‘grey list’, bankers in the country feel the government must understand what it would mean if there were further downgrading, as warned by the global terror financing watchdog. Pakistan has been on the FATF grey list since June 2018 and was lobbying hard to be removed from it.

Paris-based FATF has asked Pakistan to take steps to curb terror financing and money laundering. India is believed to have handed over to the FATF a dossier, nailing the culpability of Pakistan in the Pulwama terror attack.

“Given the limited progress on action plan items… the FATF urges Pakistan to swiftly complete its action plan, particularly those with timelines of May 2019,” the FATF said in a statement after a five-day meeting in Paris.


It noted with grave concern the Pulwama terror attack and said such attacks could not occur without money and the means to move funds between terrorist supporters.

READ | Pakistan to remain on global anti-terror body FATF’s ‘grey list’

FATF president Marshall Billingslea said they expected Pakistan to meet its commitments. The watchdog gave a 10-point action plan to Islamabad for implementation.

Bankers in Pakistan believe the government must understand that any kind of further degradation by FATF could put the country’s economy under serious threat.

Quoting RM Alam, former head of compliance who was dealing with money laundering in a commercial bank, a report in Pakistan’s Dawn newspaper website said: “All efforts for foreign investment would be zero if the country is blacklisted.” He advised the government to develop better understanding of the real problem, and needed to address the issue as per the FATF’s demand.

Alam, however, said the country had time to reach the target and there was not going to be any immediate impact.

Some bankers believe Pakistan has no option but to follow the FATF guidelines because it’s financial position is weak.

“I believe that due to weak financial position Pakistan will have to follow the guidelines given by the FATF,” Dawn quoted a senior banker as saying.

He said banks in developed economies were also involved in illegal activities but were not threatened.

“The banks are caught sometimes and are penalised like latest penalty of $5.1 billion by a French Court helping tax evasion but no country is threatened for terror financing despite the fact nobody knows where these money were transferred,” he told Dawn.

The country had been on the FATF grey list between 2012 and 2015, before being put on the list again in June 2018, when, according to the FATF, Pakistan made a high-level commitment to work with the global body and address its strategic counter terrorist and financing-related deficiencies. The watchdog noted that though Islamabad took some steps in this direction, it had not demonstrated a proper understanding of the terror financing risks posed by organisations, including the JuD, LeT and JeM and persons affiliated with the Taliban.

The FATF said Pakistan should continue to work on its action plan to address its strategic deficiencies and gave a 10-point action plan to Islamabad for implementation.

According to sources, the FATF will review in June and October Pakistan’s commitments to crack down on terror financing. If it failed to take legal action and meet the targets set by the FATF, Pakistan could even be blacklisted.

Pakistan getting blacklisted by the FATF will likely hurt its finances and may derail its planned investments and incoming aid, plunging the country into a serious balance of payments crisis from which recovery would be hard, analysts say.

The FATF blacklist means the country concerned is “non-cooperative” in the global fight against money laundering and terrorist financing. If the FATF blacklists Pakistan, it may lead to downgrading of the country by lenders like International Monetary Fund, World Bank, Asian Development Bank, and European Union.