Out of the grey list,
still in the grey!
I
By Shahnawaz Ali
f you have tried to receive money from a foreign country or tried sending some money abroad, you might be familiar with the bureaucratic obstacle course that the banks make you do. Why do they do that? Why are big investment and commercial banks afraid to come to Pakistan? Is Pakistan not a big enough market for them? Does Pakistan not have enough potential for business from these countries and companies? While the answers to this “why” may be debatable, one of the biggest reasons that Pakistanis have to hula hoop through the procedural steps of enhanced due diligence, and that Pakistan doesn’t get the due amount of foreign investment is attributed to Pakistan’s placement on the FATF grey list. If you know what the FATF is, and what they go about doing around the world, feel free to skip the next two headings. If you don’t? Hang in there!
What is FATF?
T
he year was 1989; Drug cartels from the south were ready to cash in on the “American Dream”, all guns (literally) blazing. The issue of money laundering was bigger than ever and becoming increasingly difficult to monitor, specifically in the case of nation states. It was then that the G7 summit decided to convene a watchdog. An institution that would devise a cohesive policy against money laundering. In 1990, FATF pub-
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lished a set of 40 recommendations that were intended as a comprehensive plan to fight the said money laundering. Eleven years later, after 9/11, the FATF added eight special recommendations and in 2004 it added another one. To cut the confusion, in 2012, FATF went back to its standard 40 recommendations model which incorporated the essence all its Anti-Money laundering (AML) and Combatting the Financing of Terrorism (CFT) protocols. So, what started off as a one-year task force, has now become a Global watchdog. Its recommendations are now a global standard against AML and CFT, and more than 200 countries are committed to abide by these standards. FATF has 39 members which include countries and jurisdictions. All major Financial Institutions and countries are either members or observers of its plenaries and keep a keen eye on its assessment of every country. It has 9 associate members, which act as its regional bodies and make the enactment of the FATF recommendations in their requisite regions of the world, possible. The bottom line is that the FATF stops good money from being used for bad purposes, and stops the money earned through bad sources from entering the pool of money that is legitimately earned.
What does FATF do?
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ATF, through its regional bodies, assesses the compliance of all the countries on its recommendations. This is essentially a marksheet that
has four possible grades for your country on every one of the 40 recommendations. A C (Compliant), an LC (Largely Compliant), a PC (Partially Compliant) and an NC (Non-Compliant). The grade is given after a country is put under review and assessed on each of the 40 recommendations, regarding its compliance and the effectiveness of that compliance. Based on these grades, the country is given a report card, which decides whether it will be placed on a white list, a grey list, or a black list. White list is rather self-explanatory (and white), but the grey list or officially, the list of jurisdictions under increased monitoring, is a list of countries that need to work on their AML and CFT laws and infrastructure, if they want to be on the white list, otherwise, they’ll be placed on the black list. Black list is a list of confirmed bad boys, a placement on it, comes with a number of sanctions. One would think that if you are a “C” or “LC ‘’ on majority of the recommendations, you are out of the blue (read; black or grey). But that is where it gets tricky, because the report card i.e., the placement of your country on a list, is not entirely dependent upon just the grades (Extracurricular activities matter!). As standardised as the procedure may seem, the evaluation methodology reveals that some recommendations are more “critical” to “global peace” and “financial security” than the others. Pakistan, who became a member of APG (Asia Pacific Group) in 2000, has since been placed three times on the FATF grey list.
