Pakistan may stay on FATF grey list for six more months

Pakistan is unlikely to exit the ' Grey List' of the Financial Action Task Force (FATF) next month despite an active support of its close ally China and tactical support of some Western countries, diplomatic sources.

The FATF, an international terrorfinancing watchdog, may extend the duration of the ' Grey List' for another six months to ensure Pakistan get enough time to adopt legislative measures to restructure its banking system in line with best international practices to curb money laundering and terror financing, sources said, reported foreign media on Sunday.

Pakistan Foreign Minister Shah Mehmood Qureshi is confident of joining the 'White List' of FATF in February, but experts and diplomatic sources said the FATF is likely to extend duration of the ' Grey List' for another six months so Islamabad will have enough time to achieve 100 per cent compliance on terror financing and money laundering.

"The country should, in principle, be taken off the Grey List' as it has made considerable progress on the requirements of the FATF," Qureshi said. At a FATF meeting held in Beijing last week, Islamabad submitted its compliance report and got support from the FATF current chair China and satisfied a few Western countries about its recent action taken for FATF compliance on money laundering and financing to terror groups. However, it is still an uphill task to secure 12 more votes out of 39 to exit the ' Grey List' and move to the ' White List', sources said. In recent meetings of FATF, Pakistan has got support of Malaysia and Turkey besides China.

"Pakistan has done a remarkable job to exit the 'Grey List' of FATF. We have addressed 24 concerns out of 27 in Beijing meetings and will soon have a 100 per cent compliance on FATF guidelines," Dr Ashfaq Hassan Khan, member of the Economic Advisory Council, which is headed by Pakistani Prime Minister Imran Khan.

In October 2019 meeting, the FATF board noted that Pakistan addressed only five out of the 27 tasks given to it in controlling terror funding and money laundering. It asked Pakistan to swiftly complete its full action plan by February 2020. "We have addressed most of the technical concerns to ensure there is no more money laundering and terror financing acts in Pakistan. But there is a political side of FATF due to which it may take another six months to exit the 'Grey List'," Dr Khan said.

Pakistan was placed on the ' Grey List' by the FATF in June 2018 and was given a plan of action to complete it by October 2019 or face the risk of being placed on the blacklist along with Iran and North Korea.

If Islamabad comes out of the 'Grey List', it will be easy for the country to get financial aid from the international and multinational lenders such as the International Monetary Fund, World Bank, ADB and the European Union on easy terms and conditions to support its struggling economy. "The world is ready to help Pakistan how to ensure compliance over FATF guidelines, as we lack capacity in some critical areas of controlling terror financing, but tolerance for non-compliance is zero. The recent official actions reflect this understanding. So a reversion to the bad old days is unlikely," Pervez Tahir, former chief economist said.

Dr Shahid Hasan Siddiqui, chairman, Research Institute of Islamic Banking and

Finance, said the FATF plenary board meeting in Paris is likely to extend duration of the 'Grey List' for another six months despite having progress on majority of concerns raised it its previous meeting in October 2019. "This will be mainly due to opposition led by India, who holds vice-chairmanship of the FATF Asia Pacific Group and insists Pakistan should be downgraded to the 'Black List', a move being opposed by China. So a middle way is to extend the duration of the 'Grey List'," he said. To a question, he said Pakistan still has to work on couple of oversights on remittance laws and buying of the US dollars from open market in Pakistan to ensure 100 per cent compliance on FATF guidelines.