The Financial Action Task Force (FATF) was established in 1989 during the G7 summit in Paris with the foremost motive to stop money laundering. A system that plans and promotes a policy in order to combat economic corruption. After some time, FATF also initiated a policy to deal with virtual currencies. The Financial Action Task Force mainly targets the following:
- Money Laundering
- Terrorist Financing
- Hazards to the international financial system
Why FATF Was Created?
FATF was created to set a sequence of money laundering orders in 1990 and finally accepted the responsibility in 2001 for the advancement of rules in the battle against terrorist financing. FATF also has announced a list and wishes to encourage other nations to improve their regulative administration and ensure to follow the universal assortment of AML/CFT criteria and rules.
Aim of FATF
FATF is an independent organization that aims to introduce and encourage the implementation of lawful, administrative, and viable measures to oppose international threats along with money laundering and terrorist financing.FATF analyzes the global vulnerabilities intending to protect the global financial order from corruption.
FATF BOARD OF MEMBERS
There were a total of 37 board members of FATF till 2018 including the Gulf Cooperation Council and European Commission. Currently, FATF has 39 members out of which 37 are jurisdictions and 2 are regional organizations. Some of the members are mentioned below:
- United States
- South Africa
- Saudi Arabia
How to become a member of FATF?
The country must scrutinize some important key factors such as their insurance and banking zone, population, and considerable GDP. Also, the country must comply with internationally acknowledged economic standards and be a member of different global industries. If your country gets recognized globally and you finally become a member then your country must uphold and defend FATF recommendations. Many global organizations take part in FATF as onlookers including International Monetary Fund IMF, World Bank, Interpol, Organization for Economic Cooperation and Development (OECD) to keep an eye on money-laundering activities.
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FATF Black List And Grey List
FATF imposed 2 different types of lists based on countries activity and behavior:
1) Black List
2) Grey List
FATF Grey List Countries:
First of all, we talk about the FATF Grey List sometimes known as (Jurisdictions under raised observation) which is termed as a final warning to a country that is not complying with the directives. Grey list is more like a yellow card. Although the grey list is not as adverse as the blacklist. If you do not follow the rules, you can be expelled from the grey list and added to the Black list. According to FATF, this list is for those countries that support and funds terrorism including money laundering. While the countries in the grey list can face financial approvals from the organizations like the World Bank and IMF. Moreover, the grey list is refreshed on a regular basis when more and more countries are added to it. Present grey list includes the following:
FATF Blacklist Countries
FATF Blacklist (also known as High-Risk Jurisdictions) is made for non-cooperative countries or territories. Countries on the Blacklist are considered a threat to the whole world as they support money laundering and terrorism. Moreover, the countries on the Blacklist face economic sanctions from the organization like World Bank and IMF which affects directly the trade. FATF blacklist report is updated on the official website on regular basis. Currently, there are 2 countries present on the FATF blacklist.
- North Korea
If the countries that are present in the Blacklist improve their state and modify according to the CFT and AML regulatory administration to meet the FATF requirements they can exit the Blacklist and can be moved to the Greylist. 15 countries were blacklisted in the year 2000 by FATF. This list is updated on yearly basis.
How FATF Monitor Blacklisted Countries?
FATF monitors the countries present on a grey and blacklist and makes a report on a regular basis. When they detect any kind of suspicious activity by the countries on the black and grey list, the organizations submit the reports named suspicious activity reports SAR to the relevant economic jurisdictions to take immediate actions based on the report.
FATF keeps an eye on their business relationships and observes their transactions on a regular note.
Impact Of The Grey List On Pakistan
Pakistan was put on the grey list in June 2018 and urged by FATF to urged to impose FATF rules by September 2019 also raise its voice against financing terrorism. Pakistan was kept in the same position by FATF from 2012 to 2015. Pakistan’s involvement in the grey list expressed the fact that Pakistan’s anti-terror laws are not according to the FATF standards. Only because of that FATF pursue the freezing of funds, ban on travel across the globe, and rejection to access ammunition. Moreover, Greylist affected Pakistan badly, with some of the consequences like global boycott, devaluation in global trade, troubles in demanding loans from the World Bank, ADB, IMF, and other organizations. Financial limitations from the World Bank, IMF, and ADB.
Pakistan Efforts To roll out From the Grey List
Pakistan is trying hard to roll out from the grey list as according to a recent report, Pakistan has successfully implemented 26 out of the 27 points of the FATF standard. Pakistan has made great progress over the past few years but suitable laws have been amended. But there’s hope that Pakistan will roll out of the grey list soon. Though, according to the different sources, there is a saying that the US withdrawal from Afghanistan caused Pakistan to remain on the grey list as it will take more time to complete FATF other points. However, if you observe Pakistan’s overall performance you will get to know that there will be a time that Pakistan will roll out from the grey list very soon.
According to a recent report, Pakistan’s position is going to change by September when the US withdraws its armed forces from Afghanistan.