What is FATF?

Established in 1989 by the G7 group of countries, the FATF is an inter-governmental

body that sets standards for implementing regulatory, legal and operational measures
that will combat money laundering and terrorist financing activities.

The FATF is funded by its 36 member countries and two regional organisations, the
Gulf Cooperation Council and the European Commission.

The 40 standards

The FATF’s famous 40 standards were developed in 1990, and have been revised
periodically since 1996, the most recent revision being in October 2018. These include:

1. Highlighting the need to enhance transparency by making the beneficial ownership

information of legal persons and arrangements accessible. (For India, this has
implications for curbing tax evasion and black money.)

2. Listing out the powers and responsibilities of competent authorities like regulators,
supervisors and law enforcement agencies. (In India, this requires strengthening
regulatory agencies like the securities and banking regulators SEBI and RBI, as well as
investigative agencies like the CBI, and judges.)

3. Calling on countries to take immediate steps to ratify and fully implement extant
global and regional conventions (like the Vienna Convention), and conventions
undergoing negotiations with respect to corruption and money laundering, terrorist
financing and cybercrimes.

The statement added that Pakistan needed to work on four areas to "address its
strategic deficiencies". These include:

 demonstrating that law enforcement agencies (LEAs) are identifying and

investigating the widest range of terror financing activity, which target
designated persons and entities, and those who act on the behalf/direction of the
designated persons or entities
 demonstrating that terror financing prosecutions result in effective,
proportionate and dissuasive sanctions
 demonstrating effective implementation of targeted financial sanctions against all
1267 and 1373 designated terrorists and those acting for or on their behalf;
preventing the raising and moving of funds including in relation to non-profit
organisations; identifying and freezing assets; and prohibiting access to funds
and financial services
 demonstrating enforcement against violation of terror financing sanctions,
including in relation to NPOs, of administrative and criminal penalties and
provincial and federal authorities cooperating on enforcement cases
FATF's grey list
The FATF maintains two lists – a blacklist and a grey list. Countries on its
blacklist are those that the watchdog deems non-cooperative in the global
effort to curb money laundering and terror-financing.
The grey list, on the other hand, officially referred to as ‘Jurisdictions Under
Increased Monitoring,’ constitute those nations that present significant risks
of money laundering and terror-financing but which have committed to
working closely with the FATF in the development and implementation of
action plans that address their deficiencies.
FATF grey list constitutes countries that are considered as a safe haven for
terror funding and money laundering. Though, inclusion in the list is not as
severe as being black listed. It is a warning to the country to tackle the
issues.
If the country is not actively tackling money laundering or terror funding, it
is then blacklisted. So far, only two countries have been blacklisted, they
are Iran and North Korea.

HAVING further tightened its anti-terror financing laws, Pakistan appears

to be much better placed for its next assessment by the Financial Action
Task Force. In February, the global watchdog on money laundering and
terror financing had informed Pakistan that it had accomplished only 14
items of the 27-point action plan it had committed itself to in order to be
taken off FATF’s ‘grey list’ on which it was placed in June 2018. On
Thursday, both houses of parliament passed two time-bound FATF bills,
the Anti-Terrorism (Amendment) Bill 2020, and the United Nations
(Security Council) Amendment Bill 2020. Coming off the grey list would
considerably enhance Pakistan’s standing in the world and defuse the
threat that has hung like a sword over its economy were it unsuccessful in
its endeavours.

However, the manner in which the laws were passed is a matter of concern. The bills
and amendments to them suggested by a Senate panel were discussed in a behind-the-
scenes meeting by the government, the PML-N and the PPP. The National Assembly
then promptly rubber-stamped what was placed before it — its usual response to FATF-
related bills. Such quiescence is jarring. The legislation pertains to national security,
and the people’s representatives would be expected to have robust opinions on it. It is
also alarming, and highly unethical, for the government to have attempted to sneak in a
draconian ‘economic terrorism’ bill under the umbrella of the FATF-related legislation.
The proposed law would have allowed any citizen to be detained for up to 180 days, on
instructions by committees manned by intelligence agency personnel. Fortunately, the
opposition shot it down.

While FATF can be said to have forced Pakistan’s hand and compelled it to crack down
on the violent extremist groups that had long insinuated themselves into the warp and
weft of society, this is the only viable path ahead for this country. The notion that such
outfits can be ‘managed’ is flawed and myopic; ultimately, all of them devour their
‘host’ nation by corrupting its youth and destroying their future. Moreover, they do not
operate in silos. At some level, even those that do not carry out attacks within Pakistan
enable each other, if indirectly; all of them thus pose a security risk for the country.
Since FATF first flagged the “strategic deficiencies” in Pakistan’s financial system, the
country has taken several measures to squeeze the space in which ultra right-wing
groups can operate. In March last year, for instance, provincial administrations took
control of hundreds of madressahs, schools, mosques, etc run by the Jamaatud Dawa
and Jaish-e-Mohammed. On July 17, 2019, the JuD chief, Hafiz Saeed — on whom the
US has a $10m bounty — was arrested on charges of terror financing. In February this
year, he was sentenced for five years for the crime. There is a long road ahead, but
Pakistan is on the right path.