FATF looming

Yet again, Pakistan will be facing a three-day virtual meeting of the Financial Action Task Force (FATF) from February 22. The meeting is likely to decide whether Pakistan continues to remain on the grey list. Though Pakistan has prepared and submitted a report of its progress on regulations to curb money-laundering and terrorism financing, it is up to the global financial watchdog to make a final decision in this regard. Pakistan’s finance ministry has been asserting its position that the country has implemented 21 out of 27 regulations, but the rest of the points have remained a contentious issue and the FATF has repeatedly extended Pakistan’s stay on the grey list. Being on the grey list means there is a sword of Damocles that may throw Pakistan to the much dreaded black list. A removal from the grey list would mean that Pakistan has cleared the threat and at least for the time being can heave a sigh of relief.

The FATF expects Pakistan to implement 100 percent of the remaining points. Pakistan has been successful in making amendments to its FATF laws and has also seized the assets of banned organizations; the country now needs to make its case convincing and plausible at the FATF forum, failing which there may be dire consequences in store for us. Though Pakistan has made progress on some other points in addition to the 27 in the FATF action plan, we need to realize that essentially it is the action plan against which our performance, or a lack thereof, will be judged by the FATF. The inter-governmental composition of the FATF is also a challenge and the forum has made it clear that it is looking at the action plan with the utmost seriousness. That is one reason why a potential downgrade to the black list will have serious implications for Pakistan, as our banking system will be regarded as one with poor controls over anti-money laundering and countering financing of terrorism.

A majority of global financial institutions take the guidelines from the FATF seriously, and a move into the black list would significantly hamper remittances to the country from overseas Pakistanis. Such a scenario means even harsher and minute scrutiny on transactions. With a lackluster performance on the economic front by the current government, we cannot throw our traders who deal in exports and imports to starker straits. The making and receiving of payments would become crippling for them in the international banking sector if that were to happen. Similarly, Pakistani banks would also likely suffer. For all this and more, the government of Pakistan needs to make sure that capital inflows and investment to Pakistan do not suffer any further, as we are already under pressure from the IMF.