FATF review

There is good news and bad news for Pakistan from the crucial FATF review in Paris. The good news is that Pakistan has managed to survive the Indian attempt to get it blacklisted. The bad news is that the FATF review has not accepted Pakistan’s attempt to get itself removed from the grey list. Finance Minister Asad Umar has presented the situation as a success, which is more a political move to cover over the failure to improve financial monitoring in the country.

The FATF has told Pakistan to act swiftly to meet the timeline of May 2019 to be in a position to be removed from the grey list. As it stands, Pakistan’s position remains suspect in the issue of money laundering and countering terrorist finance. Amidst Indian pressure, the FATF pushed Pakistan to review its terrorist financing risk assessment; the force is not satisfied with how Pakistan has assessed the risk from a number of militant groups. There is little doubt that Indian pressure has been crucial to this increased scrutiny on how we are with the issue of terrorist finance.

With the next review of Pakistan’s progress set to take place in June 2019, the country faces a crucial period in fixing the issues which have left it on the brink of becoming a pariah in the world of international finance. Pakistan has two more reviews to avoid being sent into the FATF blacklist. The appraisal of the country’s efforts to fight money laundering and terrorist finance is not flattering and the message is that there is much more work left to be done. The FATF has appreciated the steps taken to create an integrated database for currency declaration, but it remains critical of a number of major issues. The fact that the FATF still believes that Pakistan has not undertaken a sufficient assessment of terrorist financing risks is particularly troubling. Step one for Pakistan should be to identify who the threat is coming from. Without doing that, it is difficult to counter terrorist finance.

It seems Pakistan is nowhere close to coming out of the deep waters, with the FATF saying it has only made ‘limited progress’ on its action plan due in January 2019. Pakistani banks have raised concerns over the country getting another warning from the FATF. We need to approach with seriousness the consequences of being blacklisted.