FATF: Financial Action Task Force

Introduction:

It is an international body that deals with money transaction and list out countries on the basis of money
laundering and terror financing. It has three lists i.e. white grey and black. It has an assisting group in
Asia called pacific group who manages and monitor the policies of FATF in Asia regarding money
laundering and terror financing. But it doesn’t have the power to enlist a country into a list. It only
advises FATF to take action against some countries.

If a country is placed in white list, it means they are free of money laundering and terror financing.
Those countries which sponsor money laundering and terror financing are first placed in the grey list and
the push forward into black list. Pakistan has been enlisted two times in grey list, one in 2012-15 and
then from 2017-now.

Why Pakistan is in the Grey list?

There is a series of pattern of money laundering

i- Fake account: Fake accounts are common around the world and especially common in those
countries where the transaction system is weak. FIA in this regard have usurp thousands of
accounts across the countries. In these accounts, notorious phenomenon of money
launderings has been applied which includes the placement of money in particular account
and layering. Layering in which money is transferred from one account to another through a
series of transaction and is even sent to abroad. It is done repeatedly to confuse the system.
In some accounts, the owner is not registered and money is placed in it e.g. a case was
found similar in this regard in which a company was registered by the name of Pakistan steel
mill which was not even there in reality. Also the cases of money emplacement have been
found in fake name accounts. In 1991, a law was passed in which it was stated that anyone
can send money back to their home without mentioning their source which was used
continuously by these money launderers.
ii- Dollar Flight from Country: there are multiple ways in which dollar is smuggle out of this
country into Afghanistan, UAE through tourist companies and celebrities. Dollar is also
smuggling through imports by overpricing that products.
iii- Terror financing: There have been a series of terrorist organization in Pakistan that are
active in some areas of Pakistan. These networks include Haqqani Network, Jamiat Ud
Dawa, Lashkar-e-Taiyba and many more. These terrorist organizations receive money from
middle east through non-money exchangers. They also receive these moneys through
importers. They purchase products and then import them to Pakistan and sell it to benefit
their terror organization. In this practice, the Non-Government Organization are also
involved.
iv- Strained relations of FATF: In 2012, FATF was led by US from the front when Pakistan and
US relationship became sour. In 2017, US led the process from the front to drag Pakistan
into the grey list again. US even pressurized Saudi Arabia to back out from allying Pakistan in
this case.
Impact of being in the grey list for Pakistan: Due to the enlisting of Pakistan into grey list, international
investors are not prohibited from Pakistan but they are fear to invest in Pakistan. The list is projecting a
hard image of Pakistan. These terrorists have been receiving funds from abroad which gives an
indication that Pakistan is not safe for investment because the leadership is involved in Pakistan.

Coming out of grey list: Pakistan is trying to out itself from grey list. It has showed some promise on 21
points but not showing on some points. These points include:

i) FATA clear: the FATA have been cleared from terrorist networks
ii) Kashmir based Terrorist groups have been banned.
iii) The 1991 law has been amended, now the source will be asked.
iv) Invoicing and under invoicing system have been adopted to control the dollar flight and tax
evasion
v) State bank and commercial banks have increased collaboration to take action against fake
accounts.
vi) The documentation of the whole economy is in process.
vii) There has been increase in the amount of taxpayers now, more than 2 million tax payers are
now contributing to the national treasure
viii) Freezing of terrorist organization accounts gave been done.

On 17th October the team of FATF gives more time to Pakistan to achieve the necessary targets by
February 2020.