Following a spate of conflicting and official statements and news reports, the Pakistani government plainly confirmed that the country will be placed on the Financial Action Task Force’s (FATF) ‘grey list’ from June 2018.[1] On 01 March 2018, Pakistan’s Foreign Office stated: “Pakistan will be assigned to the ‘grey list’ in June, once an Action Plan has been mutually negotiated.”[2]
Formed in 1989, the FATF is an international body formed of 35 member states and two regional bodies – i.e. the European Commission and the Gulf Cooperation Council (GCC) – with the objective of measuring Anti-Money Laundering (AML) and Counter Financing Terrorism (CFT) compliance of all states. In general, the FATF uses United Nations Security Council Resolutions (UNSCR) as its legal framework against which it examines the financial policies and actions (and the results of those actions).
Simply, Pakistan’s inclusion in the FATF’s ‘grey list’ basically means that the FATF cannot authenticate or guarantee that Pakistan is fully adhering to AML/CFT mandates set by UNSCRs. However, because Pakistan is committed to adhering to those mandates, the FATF will have Pakistan demonstrate improvement.
In June, Pakistan will be put on that list provided it submits an approved plan to the FATF to improve its AML and CTF compliance measures. This will be done through the ‘Action Plan’ described by Pakistan’s Foreign Office. However, if the FATF rejects Pakistan’s plan (or Pakistan fails to submit one), then Pakistan would be at risk of being put on the FATF’s ‘black list’.
Functionally, the FATF is a watchdog. It is not a legal entity nor do the FATF’s decisions necessarily result in legal ramifications for states identified by it. However, the FATF’s membership comprises of important states, such as the US, UK, France, Germany, China and other leading commercial, financial and trading hubs, giving the watchdog actual teeth (provided the member states respect it in their own dealings).
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