FATF keeps Pakistan in Grey List for Failing to Stop Terror Financing

February 23, 2019

The Financial Action Task Force (FATF) condemning the Pulwama Terror Attack has decided to continue the ‘Grey’ listing of Pakistan for its failure to stop funding of terrorist groups such as Jaish-e-Mohammad, Lashkar-e-Taiba and Jamat-ud-Dawa.

Why FATF has decided to continue Pakistan in Grey List?

  • The statement issued by FATF states that Pakistan should continue to work on implementing its action plan to address its strategic deficiencies, including by adequately demonstrating its proper understanding of the terror financing risks posed by the terrorist groups and conducting supervision on a risk-sensitive basis.
  • FATF notes that even though Pakistan has revised its terror financing risk assessment, it does not reflect proper understanding of the TF risks posed by Da’esh (ISIS), AL-Qaida, JuD (Jamat-ud-Dawa), FIF (Falah-e-Insaniat Foundation), LeT (Lashkar-e-Taiba), JeM (Jaish-e-Mohammad), HQN (Haqqani Network) and persons affiliated with the Taliban.
  • Noting the limited progress on action plan items due in January 2019, FATF urged Pakistan to swiftly complete its action plan, particularly those with timelines of May 2019.

How the Grey Listing would impact Pakistan?

  • Grey list will endanger Pakistan’s handful of remaining banking links to the outside world. This would cause real financial pain to the fragile economy of Pakistan.
  • Grey listing will squeeze Pakistan’s economy and make it harder to meet its mounting foreign financing needs, including potential future borrowings from the International Monetary Fund (IMF).
  • Grey listing would also lead to the downgrading of Pakistan’s debt ratings by international banking and credit rating agencies, making it more difficult to tap funds from international bond markets.
  • It will also suspend international funds and aid to Pakistan such as Coalition Support Funds (CSF), money which the US owes to Pakistan for military operations.

Grey Listing will also lessen investors confidence in Pakistan and impacts its imports and exports, widening its existing huge current account deficit (CAD).
 

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