Pakistan’s Exit from FATF Grey List: Progress Against Money Laundering and Terrorism Financing but Vigilance Needed

In a noteworthy development, the Financial Action Task Force (FATF) announced on Tuesday, February 22, 2022, that Pakistan had been removed from the grey list. This significant move signifies the end of four strenuous years of increased monitoring for Pakistan due to shortcomings in its efforts to counter money laundering and terrorism financing.

Pakistan’s Plight on the Grey List

FATF, an international watchdog, added Pakistan to its grey list in June 2018, citing weaknesses in Pakistan’s legal, financial, regulatory, investigative, prosecutorial, and non-government sectors. The designation was a grave concern for the country’s economy and reputation.

Substantial Progress and Milestone Achievement

According to the official FATF report, Pakistan has made considerable progress in addressing the technical compliance deficiencies identified in its Mutual Evaluation Report (MER). The country is now largely compliant or compliant on 38 FATF recommendations.

Figure 1: Pakistan’s Progress Towards FATF Recommendations (Source: ResearchGate)

Ongoing Challenges and Vigilance

Although Pakistan has successfully exited the grey list, the country must remain diligent in its efforts to counteract corruption and money laundering. Both phenomena have deep-rooted causes and demand comprehensive solutions.

Former Progress

Pakistan embarked on a rigorous overhaul of its legal framework aimed at countering money laundering and terrorism financing in response to being on the grey list. The country significantly strengthened its financial, regulatory, investigative, judicial, and prosecution frameworks.

Future Priorities

Despite the successful delisting, Pakistan must continue to strengthen its institutions and maintain the momentum of its progress to ensure effective countermeasures against money laundering and terrorism financing.

Institutional Reform and Capacity Building

To address the lingering challenges, Pakistan must invest in the capacity building and practical training of various actors involved in the investigation process. Law enforcement agencies require better equipment, access to more software-based analytical tools, and technical gadgets. Mass-scale inspections and audits are necessary for NGOs, charity organizations, seminaries, and fundraising events. Strict, non-discriminatory regulations are essential for the effective implementation of laws.

Conclusion

Pakistan’s exit from the FATF grey list marks a significant achievement for the country and a testament to its commitment to counteracting money laundering and terrorism financing. However, it should not be the end goal. Instead, the priority must be to maintain momentum and continue implementing measures to strengthen institutions and ensure long-term progress.