Pakistan likely to get out of FATF Grey List in October 2021. This may help several Pakistani businesses in making financial transactions internationally. Moreover, it will also let millions of Pakistani freelancers to manage their payments, especially the international transactions, with much ease. Currently, this is a major issue for Pakistanis engaged in business or freelancing activities. Most importantly, it may also motivate the international financial giants such as PayPal or Payoneer to establish their base in Pakistan.
A press report from the Government of Pakistan claims that Asia Pacific Group (APG) on Money Laundering has published results of Pakistan’s third Mutual Evaluation follow-up Report on 12 August 2021. As per the report, Pakistan has achieved compliant/largely compliant rating in 4 more recommendations leading aggregate to 35/40 Recommendations rated as Compliant (C) or Largely Compliant (LC).
FATF and Pakistan
Pakistan is now in the top tier of countries that have achieved a rating of C/LC for over 35 of the 40 FATF recommendations. Moreover, Pakistan has also achieved the rating of Largely Compliance / Compliance in all Big Six Recommendations of the FATF which includes R.3(Money laundering offence), R.5(Terrorist financing offence), R.6(Targeted financial sanctions related to terrorism & terrorist financing), R.10(Customer due diligence), R.11(Record keeping) and R.20(Reporting of suspicious transactions).
The Financial Monitoring Unit (FMU) of Pakistan led the whole process of Pakistan’s Mutual Evaluation cycle and defended the ratings during their discussions in the Mutual Evaluation Committee Meetings of APG. After this upgrade, Pakistan is well placed in technical compliance in comparison to many of the countries. For example, if Pakistan’s position is compared against G20 countries, then Pakistan is on 4th after Italy (38), Saudi Arabia (38) and UK (38). You can view the methodology for assessing technical compliance of FATF.
Pakistan would continue this momentum in addressing remaining gaps identified in the Mutual Evaluation Report-2019 and would seek upgrades in remaining 5 recommendations, in the fourth Follow-up Report. Pakistan’s MER was adopted in August 2019 in which Pakistan was rated compliant and largely complaint in 10 out of 40 FATF Recommendations for the Technical Compliance.
Pakistan carried out major legal reforms with the enactment of 17 Laws along with relevant rules and regulations. These laws not only strengthened the systems in Pakistan but also brought in the sustainability.
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What is FATF?
The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society. As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.