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The global money laundering and financing watchdog has removed Pakistan from its list of countries under increased monitoring after four years.
Pakistan had been on the greylist since 2018 because of “strategic counter-terrorist financing-related deficiencies”, but after an on-site visit in September, the Financial Action Task Force (FATF) has concluded that the required standards have been reached.
The country has been one of the longest serving on the increased monitoring list and the Pakistani government is understandably relieved that it has now been removed.
“Pakistan has made enormous progress in the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) domain over the course of fulfilling requirements of both Action Plans,” said Pakistan’s foreign ministry in a statement.
“Despite many challenges, including COVID-19 pandemic, Pakistan continued the reform trajectory and sustained the high-level political commitment of aligning its domestic AML/CFT regime with international best practices.”
Greylisting can have incredibly negative effects on countries that are put onto it. Beyond reputational damage, it can limit funds from institutions, such as the International Monetary Fund (IMF) and the World Bank.
In fact, an IMF working paper on the impacts of a FATF greylisting warns the move typically has a “significant negative impact on a country’s capital flows".
“The magnitude of the negative effect is large, on average -7.6 percent of GDP. It varies, however, by type of capital flow,” according to the IMF paper.
Achieving FATF targets was a whole-of-nation endeavour, Pakistan’s foreign ministry said. “Multiple ministries, departments and agencies, both at the federal and provincial levels, contributed to achieving this national objective.”
“The engagement with FATF has led to strategic improvements in Pakistan’s laws and procedures, making its domestic AML/CFT regime more resilient to cope with current and future challenges.”
Other news from the plenary
As well as Pakistan, Nicaragua was also removed from the greylist, with FATF stating that it has addressed technical deficiencies to meet the commitments of its action plan regarding strategic deficiencies in the areas that the standards setter identified in February 2020.
However, the organisation did warn the country that it is “strongly concerned” by the potential misapplication of the FATF standards resulting in the suppression of Nicaragua’s non-profit sector, encouraging it to work with regional bodies.
Meanwhile, new jurisdictions subject to increased monitoring are the Democratic Republic of Congo (DRC), Mozambique and Tanzania.
Gibraltar, which was placed on the greylist in June, remains so, with FATF blaming the British overseas territory’s large gambling industry.
However, the jurisdiction has so far seemed unfussed, with its gambling commissioner, Andrew Lyman, stating that fines would not be increased simply because of the FATF decision.
“Gibraltar needs to increase the dissuasiveness of its penalties, in particular fines related to the gambling industry and the legal sector that serves these companies,” said FATF president T Raja Kumar during a speech at the plenary.
“Gibraltar is a small jurisdiction, but it is an offshore financial hub, and the home to many gambling companies.”
The FATF plenary also touched upon the Russian invasion of Ukraine.
“The FATF reiterated its deepest sympathies for the needless loss of life, suffering and destruction caused by the ongoing Russian invasion of Ukraine,” it said in a statement.
As a result of Russia’s continuing actions, FATF has decided to impose additional restrictions on the country’s remaining role, including by barring it from participating in current and future FATF project teams.
Russia is also barred from participating in meetings of the FATF-style regional bodies as a FATF member.
These measures expanded the actions that FATF took in June, which stripped Russia of all its leadership roles among other restrictions.
“The FATF will continue to monitor the situation and consider at each of its Plenary meetings whether grounds exist for lifting or modifying these restrictions.”
