FATF

The Financial Action Task Force (FATF) was established in July 1989 by a Group of Seven (G-7)
Summit in Paris, initially to examine and develop measures

*to combat money laundering.

In October 2001, the FATF expanded its mandate to incorporate efforts to combat

*terrorist financing,

In April 2012, it added efforts

to counter the financing of proliferation of weapons of mass destruction.

OBJECTIVES

The objectives of the FATF are to set standards and promote effective implementation of legal,
regulatory and operational measures for combating money laundering, terrorist financing and other
related threats to the integrity of the international financial system and, promotes the adoption and
implementation of the FATF Recommendations globally.

MEMBERSss

FATF consists of thirty-seven member jurisdictions and two regional organisations (European
Commission and the Gulf Co-operation Council).

What is the Grey-list?

FATF’s grey list includes countries that are not doing enough to fight money laundering and terrorist
financing.

PAKISTAN IN GRAY LIST

Pakistan was on this list previously for three years between 2012 and 2015. The task force recognized
Pakistan’s efforts and removed it from the grey list in 2015.

However due to the tensions between United States and Pakistan, and considering the influence that US
has on other countries, Pakistan has been placed in the grey-list yet again, which will be effective from
June this year.
Other countries, apart from Pakistan, included in the list are; Ethiopia, Iraq, Yemen, Serbia, Syria, Sri
Lanka, Trinidad and Tobago, Tunisia, and Vanuatu.

What Does it Mean to Be in the Grey List?

Inclusion in this list is not good for any country especially a country like Pakistan whose global reputation
continues to suffer.

Firstly, Pakistan’s inclusion in the terror financing list portrays a negative image to the world.

Secondly, it also conveys the impression that a country’s financial system is weak and effective
measures aren’t being taken to halt money laundering or financing groups that have been banned for
indulging in terrorist activities.

But the most important reason? It is bad for the country’s economy. Countries placed on these lists see

a decrease in foreign investment and foreign companies hesitate to invest considering the potential ties
to terrorist activities. It is bad for the reputation of other companies as well. No company wants to be
doing business with a country that has possible ties with terrorist funding activities or lacks a process
that prevents such activities.

Apart from this, it will be difficult for Pakistan to get foreign loans from IMF, World Bank or Asian
Development Bank etc as well. It could also prove hard to raise debts from international markets.
Foreign banks (like Standard Chartered) may also decide to pull out, hitting the financial sector of
Pakistan.