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FATF Action Plan for Pakistan

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June 30, 2018

Why in news?

Pakistan has been formally put on the grey list by the Financial Action Task Force (FATF).

What is the Financial Action Task Force?

  • The FATF was set up in 1989 by the G7 countries.
  • Members - With headquarters in Paris, FATF has 37 members.
  • They include all 5 permanent members of the Security Council and other countries with economic influence.
  • Two regional organisations, the Gulf Cooperation Council (GCC) and the European Commission (EC) are also its members.
  • Saudi Arabia and Israel are “observer countries” (partial membership).
  • India became a full member in 2010.
  • Objective - FATF acts as an ‘international watchdog’ on issues of money-laundering and financing of terrorism.
  • It is empowered to curtail financing of UN-designated terrorist groups.
  • It can publicly sensor countries that are not abiding by its norms.
  • It is to limit the concerned countries from sourcing financial flows internationally and thereby constraining them economically.

What is the recent decision?

  • FATF earlier decided to place Pakistan in the grey list for inaction against terror funding.
  • It has now unanimously agreed to put into effect the above decision.
  • The move comes as a response for Pakistan's inaction against terror funding.
  • The Financial Action Task Force (FATF) has laid out a 10-point action plan for compliance with its guidelines.
  • Pakistan has been instructed to take measures and to demonstrate the action on guidelines given.
  • UN-designated terrorists and banned terror outfits should be deprived of their resources.
  • Also, their sources of funding are to be choked.
  • The designated ones include Hafiz Saeed and Masood Azhar, Taliban and Haqqani Network, Jaish-e-Mohammad, Lashkar-e-Taiba, and their affiliates.
  • If Pakistan fails to implement the action plan, it could be included in the black list the next year.

What are the guidelines?

  • Pakistan will have to take steps to ensure that terror funding risks are properly identified and assessed.
  • Also, it will have to ensure that supervision is applied on a risk-sensitive basis.
  • Measures are to be taken to prevent financial institutions from indulging in money laundering and terror funding.
  • It should take action against illegal financial operations, identify cash couriers and enforce controls on illicit movement of currency.
  • It has been told to improve coordination between the provincial and federal authorities on combating terror funding.
  • Enforcing effective prosecution and conviction of the designated persons, entities and their affiliates are specified.
  • The FATF has also sought actions demonstrating effective implementation of targeted financial sanctions.

What is Pakistan's response?

  • After 2012-15, this is the second time it has been grey-listed and is facing sanctions.
  • The placement on the ‘grey list’ could hurt Pakistan’s economy as well as its international standing.
  • Pakistan had this time round made a high-level political commitment.
  • It has agreed to work with the global watchdog and the Asia Pacific Group, of which it is a member.
  • It would perceivably strengthen its anti-money laundering and counter terror-financing regime.

 

Source: The Hindu

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