The Financial Action Task Force (FATF) plenary, Pakistan now faces being put on the “blacklist” of the FATF’s Asia affiliate, the Asia-Pacific Group (APG), that will conclude its meetings in Canberra, Australia on 23 August, 2019.
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While the two processes are separate, the APG blacklisting, or ‘Enhanced Expedited Follow Up’ status would definitely impair Pakistan’s chances at extricating itself from the FATF greylist that deals with countering terror-financing and money-laundering, at its Paris plenary later this year.
Sources told that the Asia-Pacific Group meeting, which began on August 18, completed a third evaluation (MER) of Pakistan’s actions over the past five years on building anti-money-laundering and countering financing of terrorism (AML/CFT) safeguards, and found them wholly inadequate.
According to the APG’s final report, expected to be made public after the meeting ends, Pakistan failed in 32 of 40 ‘compliance’ parameters for its legal and financial systems, and failed 10 of 11 ‘effectiveness’ parameters for enforcing safeguards against terror-financing and money-laundering by UN-sanctioned entities and other non-government outfits.
As a result, Pakistan is likely to be placed on the fourth and lowest rung of the APG’s Follow-Up (FU) listing, the Enhance Expedited Follow Up, the sources said. This would make the Pakistani government’s next steps, as it faces FATF reviews in September and October much more challenging.
India is a member of both the APG and the FATF consultations and is represented by a team of officials from the Ministries of Finance, External Affairs and Home Affairs. However, the actions demanding Pakistan’s review have been pushed by the U.S., the U.K., Germany and France. Pakistan’s multi-ministerial team at the APG meeting is led by its State Bank Governor.
Last week, Islamabad had submitted a 450-page compliance document that details all the changes the government has made to existing laws, and actions against terror groups in the past year and a half. Pakistan has claimed that it has charged Lashkar-e-Taiba/ Jamaat-ud Dawa (JuD) chief Hafiz Saeed with terror financing, and frozen all assets of the JuD and other UNSC banned outfits this year, as part of its ongoing efforts to crack down on terror.
The compliance document will be reviewed against a 27-point action plan set out by the FATF, which could decide one of three options: to remove Pakistan from the greylist, to continue to keep it on the greylist, or to downgrade it further to its blacklist. Review meetings will be held in Bangkok on September 5, with a final decision at the Paris plenary session on October 18-23. If Pakistan stays on the greylist, or is blacklisted, it faces not only a financial downgrade and restrictions on its markets, but will have a tough time managing capital inflows from IMF and other agencies, as well as servicing debt that adds up to about 25% of the government’s revenues at present.
