ISLAMABAD – Pakistan is set to face more financial difficulties and thecost of doing business would go up after the country was again placed onthe “grey list” by a global anti-money laundering body for failing to curbterror financing, experts said.
Pakistan was placed on the Financial Action Task Force (FATF) grey list’ onJune 27 after it failed to put in place measures to prevent moneylaundering and other illegal transactions that may be used for financingterrorism.
Though the move may not hit the country immediately, its impact could befelt in the coming months as bankers said the cost of doing business wouldget higher and the situation for banks would become more difficult than itwas during 2012-15 when the country figured in the FTAF’s list, mediareports said.
“Cost of doing business will be higher due to this grey list but it ismanageable for banks with some difficulties,” Hussain Lawai, a banker, toldDawn newspaper. “Remember we were in the watch list from 2012-2015 but wemanaged to continue doing business,” he noted.
However, there is a difference this time as Pakistan’s large banks like theHabib Bank, the United Bank and the National Bank are not working ascorrespondent banking channels. These were operating during 2012-2015 whichhelped trading and banking to run smoothly, the report said.
“With the grey list, large banks like JPMorgan Chase, Citibank and otherswill suspend credit lines which mean they would not accept letter ofcredits (LCs),” said Lawai.Now the opening of Letter of Credit (LCs) tosome extent would be difficult, but still manageable, he added.
The FATF is an inter-governmental body established in 1989 to combat moneylaundering, terrorist financing and other related threats to the integrityof the international financial system.
Pakistani banks find it very difficult to operate under the current lawsand regulations in countries like the US. Last year, Habib Bank had to paya penalty of USD 225 million to the Department of Financial Services of NewYork State for violating multiple state regulations and also had to unwindits operations there.
Analysts were anticipating the impact on exchange rate in case ofPakistan’s enlistment in the grey list but the currency market did not showany significant impact despite the fact that the exchange rate is alreadyunder pressure due to depleting reserves of State Bank and widening currentaccount deficit.
The currency dealers in the interbank market said there was no change asthe dollar remained at the same level of Rs 121.50.
“The dollar which has lost during this week about Rs 1.5 gained the same onthe last day of business (Friday), said general secretary ExchangeCompanies Association of Pakistan Zafar Paracha.
Currency dealers in the open market believe that the banks would face thefirst impact of grey list that would be reflected in the open market.
“The effect of grey list may come later but there is no impact of tax onillegal foreign assets and cash under amnesty scheme as the taxed amount(if any) is not visible in the country’s balance sheet, Paracha said.
The FATF at its just-concluded session in Paris has asked Pakistan todemonstrate effective implementation of targeted financial sanctions(supported by a comprehensive legal obligation) against all 1267 and 1373designated terrorists and those acting for or on their behalf.
The Pakistan government has also to curb the raising and moving of funds bythe UNSC designated terrorists, identifying and freezing their assets andprohibiting access to funds and financial services.