Pakistan on the FATF grey list

Background

The Financial Action Task Force (FATF), an intergovernmental body based in Paris, sets standards against money laundering and terrorist financing. Countries with strategic deficiencies that commit to an action plan are placed on its list of "jurisdictions under increased monitoring", known as the grey list, which can raise the cost of finance and deter investment. Pakistan had been grey-listed before, from 2012 to 2015.

What happened

In January–February 2018 the United States tabled a motion to place Pakistan back on the grey list over its counter-terrorist financing shortcomings, with support from the United Kingdom, France and Germany^1,2. At the February plenary in Paris there was initially no consensus, and a decision was deferred for three months². At the June 2018 plenary Pakistan was formally placed under increased monitoring; the FATF statement of 29 June listed it among jurisdictions that had made a high-level political commitment to work with the FATF and the Asia/Pacific Group to implement an action plan addressing strategic counter-terrorist-financing deficiencies^3,4. The plan contained 27 items.

Pakistani officials argued that the listing was politically motivated and driven by India and the United States; US officials said it concerned Pakistan's failure to act against UN-designated groups such as Lashkar-e-Taiba and Jaish-e-Mohammed and their fronts^1,2.

Why it mattered

The grey-listing became one of the most effective external levers on Pakistan's counter-terrorism policy in the following years. Pakistan passed new laws, prosecuted leaders of proscribed groups - including Hafiz Saeed, convicted on terrorist-financing charges - and tightened oversight of charities and the financial sector. The process was multilateral but closely tied to the US–Pakistan relationship, because Washington's support was needed for any exit.

Legacy

In June 2021 the FATF gave Pakistan a second, money-laundering-focused action plan. At its plenary of 20–21 October 2022 the FATF found that Pakistan had substantially completed both plans, covering 34 action items, and removed it from increased monitoring^5,6.