FATF Pakistan grey list

Pakistan now fully or largely compliant with 31 of 40 FATF recommendations

Pakistan’s rating has improved on 21 action points of global money laundering watchdog the Financial Action Task Force (FATF), according to the latest follow-up report.

In the second follow-up report released by the Asia Pacific Group (APG) on Money Laundering, the Asia secretariat of the Paris-based FATF, Pakistan’s rating was re-evaluated to the “compliant” status on five criteria, “largely compliant” on 15, and ‘partially compliant’ on one count.

This means Pakistan is now fully or largely compliant with 31 out of 40 recommendations.

However, the APG has downgraded Pakistan to non-compliant from partial compliant on one count: the Mutual Legal Assistance (MLA) agreement.

In 2018, the FATF placed Pakistan on its “grey list” of countries with inadequate controls over terrorism financing, which made foreign firms more cautious about investing in Pakistan.

Since then, Pakistan has made significant progress to plug the gaps and worked on FATF’s action points.

With the latest follow-up report of the APG, however, the chances of Pakistan’s blacklisting – meaning further downgrading of the country’s status – is off the table for now.

According to the APG, there are four possible levels of technical compliance: compliant, largely compliant, partially compliant, and non-compliant.

Out of the total 40 recommendations, Pakistan is now fully compliant with seven, largely compliant with 24, partially compliant with seven, and non-compliant with two recommendations.

However, the APG has retained Pakistan on “Enhanced Follow-up” for sufficient outstanding requirements.

“Pakistan will move from enhanced (expedited) to enhanced follow-up, and will continue to report back to the APG on progress to strengthen its implementation of anti-money laundering and combating financing terror (AML/CFT) measures,” the APG said.

The reporting date for the current APG evaluation was October 1, 2020. The means that Pakistan’s rating may have improved further since then and may reflect in later reports.

Pakistan submitted its third progress report in February 2021 and an evaluation has yet to be made.

“Overall, Pakistan has made notable progress in addressing technical compliance deficiencies identified in its Mutual Evaluation Report (MER) and has been re-rated on 22 recommendations,” the APG added.

Pakistan’s status has been re-rated to compliant on the following five targets:

  • Money or value transfer services
  • Higher risk countries
  • Reporting of suspicious transactions
  • Tipping-off
  • Confidentiality and powers of supervisors

The 15 action points on which Pakistan’s rating has improved to largely compliant include:

  • Assessing risk and adopting risk-based approach
  • Targeted financial sanctions relating to terror and terror financing
  • Targeted financial sanctions related to proliferation
  • Non-profit organization
  • Politically exposed persons
  • Reliance on third parties
  • Designated non-financial business and professions (DNFBPs) in terms of due diligence and other measures
  • Transparency in beneficial ownership of legal persons and related legal arrangements
  • Responsibilities of law enforcement and investigation authorities
  • Cash couriers, sanctions and other forms of international cooperation
  • Regulation and supervision of DNFBPs

On the following two counts, the country was downgraded to the non-complaint status:

  • Mutual legal assistance (MLA) with other countries
  • Freezing and confiscation of assets and accounts.

The government has worked aggressively to improve its effectiveness on AML/CFT system since the first follow-up report released in February last year.

In the first follow-up report, Pakistan’s progress was largely found unchanged, i.e. non-compliant on four recommendations, partially compliant on 25, and largely compliant on nine.

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