Chanakya Daily Editorial Analysis
PAKISTAN REMOVED FROM GRAY LIST
- GS Paper 3: Terrorism
Important for:
- Prelims exam: Institution involved to curb terrorism
- Mains exam: India’s Approach towards terrorism
Why in News?
Financial Action Task Force (FATF) excluded Pakistan from the grey list of the global watchdog on terror financing and money laundering after four years.
What is FATF?
- The Financial Action Task Force is an international watchdog for financial crimes such as money laundering and terror financing.
- It was established at the G7 Summit of 1989 in Paris to address loopholes in the global financial system after member countries raised concerns about growing money laundering activities.
- In the aftermath of the 9/11 terror attack on the U.S., FATF also added terror financing as a main focus area. This was later broadened to include restricting the funding of weapons of mass destruction.
- The FATF currently has 39 members. The decision-making body of the FATF, known as its plenary, meets thrice a year.
- Its meetings are attended by 206 countries of the global network, including members, and observer organizations, such as the World Bank, some offices of the United Nations, and regional development banks.
What are FATF’s ‘gray’ and ‘black’ lists?
The words ‘gray’ and ‘black’ list do not exist in the official FATF lexicon, they designate countries that need to work on complying with FATF directives and those who are non-compliant, respectively.
Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. Inclusion in this list means a warning to the country that it may enter the blacklist.
Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly. Iran and Democratic People’s Republic of Korea (DPRK) are under High-risk Jurisdiction or black list.
Consequences of being in the FATF list
Being listed under the FATF’s lists makes it hard for countries to get aid from organizations like the International Monetary Fund (IMF), Asian Development Bank (ADB), and the European Union. It may also affect capital inflows, foreign direct investments, and portfolio flows.
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Timeline of Pakistan under Gray List
Chanakya Daily Editorial Analysis
Why was Pakistan removed from the ‘gray list’?
Pakistan was on the “gray list” from 2012-2015, when FATF had mandated many steps.
- Since 2018, it has been handed two action plans, comprising 34 points (27+7), asking Islamabad to bring in laws on money laundering, and anti-terror laws in line with international requirements.
- Pakistan also had to maintain a database of terrorists and terror groups operating on its soil and the actions taken against them.
- Pakistan has completed many tasks given by FATF.
- Under UNSC guidelines, member states must ensure that all designated terrorists don’t have access to funds, arms and travel, and that all such terrorists are effectively prosecuted.
- Pakistan claimed it couldn’t trace JeM chief Masood Azhar, wanted for a number of attacks from the 2001 Parliament attack and the J&K legislature bombing to strikes on military camps at Uri, Pathankot and the Pulwama bombing in 2019.
What has been India’s response?
- India is a member, and hence party to all FATF decisions that are made by consensus.
- As a result, it also agreed to the decision to take Pakistan off the list, conceding in a statement that due to the FATF, Pakistan had been “forced” to take “some action against well-known terrorists”, including those involved in the Mumbai 26/11 attacks.
- Ministry of External Affairs spokesperson said “It is in global interest that the world remains clear that Pakistan must continue to take credible, verifiable, irreversible and sustained action against terrorism and terrorist financing emanating from territories under its control.”
- The government is preparing for India’s turn at FATF scrutiny or MER process, set to begin in early 2023.