ISLAMABAD – FATF’s grey list includes countries that are not doing enoughto fight money laundering and terrorist financing.

Pakistan was on this list previously for three years between 2012 and 2015.The task force recognized Pakistan’s efforts and removed it from the greylist in 2015.

However due to the tensions between United States and Pakistan, andconsidering the influence that US has on other countries, Pakistan has beenplaced in the grey-list yet again, which will be effective from June thisyear.

Other countries, apart from Pakistan, included in the list are; Ethiopia,Iraq, Yemen, Serbia, Syria, Sri Lanka, Trinidad and Tobago, Tunisia, andVanuatu.

Pakistan’s inclusion has raised a lot of concerns in the country and hashinted at a propaganda against Pakistan. Reason behind this is thatFATF evaluates country’s financial system to determine if they are to beincluded on the blacklist. However, this time, no such evaluation was doneand FATF just acted on United States of America’s proposal with the backingof France, Germany and Britain.

Financial Adviser to the Prime Minister, Miftah Ismail, says that this isnothing but a politically vindicated move by USA. According to him,Pakistan has made conspicuous efforts to fight money laundering andterrorist financing, but instead of supporting Pakistan, countries arelobbying against it.

Miftah said;

What do [they] want? They just want to humiliate Pakistan. Pakistan is nota big money launderer. If they were bothered about terror financing, theywould work with us, they would see how much we have done and [what more] wewill do till June.

Inclusion in this list is not good for any country especially a countrylike Pakistan whose global reputation continues to suffer. Firstly,Pakistan’s inclusion in the terror financing list portrays a negative imageto the world.

Secondly, it also conveys the impression that a country’s financial systemis weak and effective measures aren’t being taken to halt money launderingor financing groups that have been banned for indulging in terroristactivities.

But the most important reason? It is bad for the country’s economy.Countries placed on these lists see a decrease in foreign investment andforeign companies hesitate to invest considering the potential ties toterrorist activities. It is bad for the reputation of other companies aswell. No company wants to be doing business with a country that haspossible ties with terrorist funding activities or lacks a process thatprevents such activities.

Apart from this, it will be difficult for Pakistan to get foreign loansfrom IMF, World Bank or Asian Development Bank etc as well. It could alsoprove hard to raise debts from international markets. Foreign banks (likeStandard Chartered) may also decide to pull out, hitting the financialsector of Pakistan.

Financial Adviser to the Prime Minister is of the opposite view,however. Miftah Ismail says that FATF’s decision will not have anysignificant effect on country’s economy. Talking to a local media channel,Ismail said;

Nothing is going to happen before June… [but even then] nothing really willhappen to Pakistan. It is not a big issue.

Pakistan, for now, has been placed on the watchlist until June. It isbelieved that Pakistan was included in the list because Jamaat-ud-Dawa andFalah-i-Insaniyat Foundation, both of which are designated as terroristsorganizations by United Nations, are allowed to work freely in the country.

Pakistan roughly has three months to devise an action plan against moneylaundering and terrorist financing. The news doesn’t end just here. IfPakistan fails to satisfy FATF with their devised strategy, then Pakistanwill be placed on the blacklist. Blacklisted countries are those thatare unwilling to fight money laundering and terrorist financing.

In case Pakistan is placed in the blacklist in June, it could have analmost irreversible impact on the economy. Recently, Pakistan’s image hasimproved overall and several big companies have announced their intentionsto invest in the country (the auto and telecom sectors being a primeexample of this). In case Pakistan is blacklisted, we might see thesecompanies step back and not invest here at all.

If Pakistan develops a report that shows how it is going to fight againstthese activities then hopefully it will be removed from the grey list.