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