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Journalism of Courage
India will submit a dossier to the Financial Action Task Force (FATF) which will make a case for putting Pakistan back in the “grey list”, The Indian Express reported on Friday.
New Delhi will specifically point to the non-compliance of certain provisions that Islamabad had promised to adhere to when it was taken off the FATF grey list in 2022 Pakistan had been in the grey list for four years, between 2018 and 2022.
The FATF is the global money-laundering and terror financing watchdog. It is an inter-governmental organisation with 40 members (including Russia whose membership was suspended in 2023).
The body “researches how money is laundered and terrorism is funded, promotes global standards to mitigate the risks, and assesses whether countries are taking effective action”, the organisation’s website states.
MONITORING & INFORMING: As a watchdog, the FATF’s primary task is to monitor how criminals and terrorists “raise, use and move funds” and “raise awareness about the latest money laundering, terrorist financing and proliferation financing techniques”.
SETTING STANDARDS: Based on its research, the FATF has a set of recommendations to “ensure a co-ordinated global response to prevent organised crime, corruption and terrorism”. These help countries to follow best practices to thwart money laundering and terror financing, and go after criminals engaged in these illegal practices.
FLAGGING NON-COMPLIANCE: This is the context in which most lay people hear of the FATF. Put simply, those who do not comply to FATF standards are flagged and put in two categories, commonly referred to as the “grey and black lists”.
The FATF identifies jurisdictions with weak measures to combat money laundering and terrorist financing (AML/CFT regimes) in two public documents that are issued three times a year — in February, June and October.
The grey list, officially “Jurisdictions under Increased Monitoring”, comprises countries that have significant deficiencies in their AML/CFT regimes but are actively working with the FATF to address these “within agreed timeframes”. As the name suggests, countries in the grey list are subject to increased monitoring by the FATF. Currently, there are 24 countries in this list.
Greylisting prompts countries to address AML/CFT deficiencies. It carries with it adverse economic and reputational impacts, which affect the inflow of foreign investment and international aid. Government of India officials had previously said Pakistan being on the grey list from 2018 to 2022 had helped curtail illicit fund flows into India, especially in Jammu & Kashmir.
The black list, officially “High-Risk Jurisdictions subject to a Call for Action”, comprises countries with “serious strategic deficiencies” in their AML/CFT regimes. The FATF urges all other jurisdictions to not only apply enhanced due diligence while dealing with countries in this list but als “apply counter-measures to protect the international financial system from the… risks emanating from the country”.
Three countries are in the black list at the moment — North Korea, Myanmar, and Iran. They have been slapped with mandated economic sanctions by FATF member countries as a result.
