What Pakistan’s removal from FATF grey list signifies

Source: The post is based on an article “What Pakistan’s removal from FATF grey list signifies” published in The Indian Express on 26^th October 2022.

Syllabus: GS 2 – International Relations

Relevance: FATF grey list and Pakistan

News: The Financial Action Task Force (FATF) has recently decided to remove Pakistan from its grey list.

What is FATF?

It checks global money laundering and prevents the misuse of international financial channels and instruments for terrorism and criminal activities.

The US has relied on FATF along with the listing of terrorist in UNSC’s designated terror list in fighting against terrorism since 1998.

However, FATF has been more influential when compared to UNSC’s global terror list.

How FATF has been more influential compared to UNSC?

The UNSC maintains the global terrorist list. The member countries pass the resolution to designate the name of terrorists in the global terrorist list of UNSC.

Once listed in the global list of terrorists the UNSC requires states to implement sanctions against them.

However, this mechanism is not very effective. Although it embarrasses the states that host the terror activities, it does not put pressure on it to comply with the requirements to end terrorism.

Therefore, FATF has been more effective in tackling terrorism and putting Pakistan in the grey list was one such effort towards ending terrorism. Although, the FATF also does not sanction states but being placed on its grey list has other consequences for a country.

How far FATF has been successful in handling Pakistan?

Pakistan was being monitored by FATF from the last two decades as the country saw an increase in the terror activities along with terror funding.

Pakistan was put in the grey list of FATF in 2018. This led Pakistan to comply with the directions of FATF else there were chances of being blacklisted.

The FATF monitoring requirements tightened bank regulations in Pakistan which also affected the citizen of Pakistan.

Further, it also impacted the government’s access to international finances including assistance from multilateral agencies and from private lenders. It has also forced Pakistan to bring down cross-border terror activities.

However, the current decision of removing Pakistan from the grey list has raised the concern for India as terrorist like Masood Azhar and others are still free. Therefore, India needs to fight terrorism diplomatically with the goal of making itself more stable and secure.