Pakistan Escapes Terror-Finance Blacklist as FATF Cites Progress

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(Bloomberg) -- Pakistan has escaped being placed on a global financial blacklist after making sufficient progress toward improving its controls on money laundering and terrorist financing.

The Financial Action Task Force urged the nation to swiftly complete its full action plan by June, following a week-long meeting of the group in Paris. Pakistan has largely completed 14 of 27 items, with varying levels of progress made on the rest of the plan, the FATF said in a statement. At the last review in October, Pakistan had completed five items.

The decision to keep Pakistan on its “grey” monitoring list means the country will escape tough sanctions on its banking system that would have accompanied a move to the blacklist. The International Monetary Fund has warned that such a downgrade could cause capital inflows to freeze up and jeopardize its $6 billion program agreed in May.

FATF had set a February deadline for Pakistan to meet all its requirements to avoid joining Iran and North Korea on the blacklist. The measures include identifying and supervising terror financing risks and boosting controls on illicit currency movement. Pakistan has been on FATF’s monitoring list since 2018 and failed to meet three previous deadlines for completing the program.

“All deadlines in the action plan have expired,” said the statement. “While noting recent and notable improvements, the FATF again expresses concerns given Pakistan’s failure to complete its action plan in line with the agreed timelines and in light of the TF risks emanating from the jurisdiction.”

FATF also warned the nation of the consequences if it does not make progress, which could include urging countries to advise financial institutions “to give special attention to business relations and transactions with Pakistan.”

Hafiz Saeed, the man India says is the mastermind of the 2008 attacks in its financial capital Mumbai, was found guilty of terror financing and sentenced to 10 years in a Pakistani jail this month.

Pakistan “remains committed to the earliest completion of its FATF action plan,” Pakistan’s Economic Affairs Minister Hammad Azhar said in a message on Twitter before leading the country’s delegation to the Paris meetings. “We look forward to acknowledgment of significant progress” that Pakistan has made, he added.

Pakistan had also been looking for diplomatic support to avoid a move to the FATF blacklist. China, Turkey and Malaysia have lobbied to prevent severe penalties in the past, and Turkey’s President Recep Tayyip Erdogan reiterated his support for Pakistan this month.

India, which accuses Pakistan of funding militant groups operating in India’s portion of Kashmir, had lobbied strongly for a downgrade.

©2020 Bloomberg L.P.

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