Pakistan's removal from the list will smoothen foreign direct investment and give a much-needed boost to the country's ailing economy, experts say.
An international watchdog for combatting money laundering and terrorist financing is set to announce its decision on whether to remove Pakistan from its “grey” list at the end of its four-day plenary session in Germany on June 17.
Pakistan has been on the Financial Action Task Force’s (FATF) ‘grey’ list since June 2018. In its previous plenary session in March, the FATF said Pakistan had completed 26 of the 27 action items in its 2018 action plan.
The FATF, established in 1989, sets international standards for preventing international financial crimes that aid terrorism.
Genuine question, esp for PTI folk: if Pak is off the Fatf grey list, what exactly will change for the average person?— cyril almeida (@cyalm) June 17, 2022
While the Pakistani government is hopeful for a positive outcome, Minister of State for Foreign Affairs Hina Rabbani Khar has warned against "prejudging the outcome or speculative reporting".
It takes an “on-site” visit to exit the grey list, which could take up to seven to eight months.
Why was Pakistan on the FATF list?
Pakistan first entered the list in 2008 and exited in 2010. The country was placed again on the list from 2012 to 2015.
It has been back on the ‘grey list’, also known as the “increased monitoring list”, since 2018.
In 2021, the global body emphasised that Pakistan needs to prosecute members of the UN-designated terror groups, including Jaish-e-Mohammed chief Masood Azhar, Lashkar-e-Taiba founder Hafiz Saeed, and its ‘operational commander’ Zakiur Rehman Lakhvi.
“Getting off the FATF grey list is a highly technical process, but at some point, the international community needs to recognize Pakistan for the genuine steps it has taken against certain militant groups and their leaders,” Adam Weinstein, a research fellow specialising in Pakistan and Afghanistan at the Quincy Institute for Responsible Statecraft, told TRT World.
As per FATF procedure, an onsite visit is conducted before removing a jurisdiction from grey listing.— Hammad Azhar (@Hammad_Azhar) June 17, 2022
Pak's hard work on completion of 34 action items during last 3 years is a result of teamwork of officers that worked day & night in different govt depts.They are the real heroes! pic.twitter.com/ccHFeH9BY0
In April, Pakistan sentenced Saeed to 31 years in prison in two cases of terrorism financing.
“Pakistan’s government initially focused on peripheral matters of concern rather than the core issues of terrorist financing and enforcement,” Weinstein said.
“Let’s face it, there are many other countries that present a greater money laundering risk than Pakistan but aren’t grey listed. Pakistan was singled out due to terrorism.”
What are the implications of being on the ‘grey’ list?
Pakistan’s economy is dependent on international investors. If the country remains on FATF’s grey list, it will continue to impact its imports, exports, and remittances and limit its access to international loans.
According to Weinstein, lifting Pakistan from the list will remove one more barrier to foreign direct investment, but many other self-inflicted ones will still exist.
“It’s hard to calculate the impact of a grey listing because it incurs repetitional costs, deters foreign investment, and may even reduce consumer spending,” he said.
However, the effect of a de-listing will not be quite a game-changer because the economy has so many other issues, Weinstein added.
The international body was initially set to develop measures to combat money laundering, but after the 9/11 attacks, its role expanded to prevent terrorist financing.
FATF meets this week. Pakistan could very well be removed from the gray list, thanks to a 31-year terror financing sentence for Hafiz Saeed handed down in April, just before Imran Khan lost power. Pakistan's last FATF action item to be completed had been convictions/prosecutions.— Michael Kugelman (@MichaelKugelman) June 14, 2022
FATF Standards now ensure a coordinated global response to prevent organised crime, corruption, and terrorism. It also works to help authorities to stop funding for weapons of mass destruction.
FATF delegates representing 206 members of the global network and its observers, including the International Monetary Fund (IMF), the United Nations, and the World Bank, attended the meeting.
“Removal from the gray list would be a big boost for Pakistan during a serious economic crisis..,” Michael Kugelman, deputy director and senior associate for South Asia at Wilson Center, said.
“...as investors/banks would no longer have to worry about any reputational risks associated with doing business with Pakistan while it's on a watch list for terrorist financing.”