The FATF Conundrum


The FATF Conundrum

How to avoid being blacklisted?

Aftab H. Wahla

The continued grey-listing on the part of Financial Action Task Force, the anti-money laundering and counter-terror financing global watchdog, has emerged as a major source of concern for the policymakers of Pakistan as the constant threat of blacklisting with potentially terrible financial and economic consequences continues to haunt the incumbent government. Now that the recent plenary meeting of FATF, held at Orlando, USA, from 16 to 21 June has shown deep reservations on the degree of technical, administrative and legal compliance of FATF recommendations and action plan shown by Pakistan, it will be fruitful to have some basic understanding about FATF so as to suggest some legal, political, diplomatic and administrative remedies to remove once for all the sword of Damocles ever hanging on the head of Pakistan.

FATF is a 38-member intergovernmental agency which was established in 1989 during a G-7 summit in Paris with an initial aim to develop and implement measures to curb money laundering. Later, in 2001, its mandate was expanded to include counter-terror financing efforts.  FATF expanded its area of jurisdiction again in 2012 by adding counter-financing for weapons of mass destruction or counter-financing for proliferation efforts in its mandate. Now this organization works in close collaboration with its members (36 countries and 2 organizations, i.e. European Commission and Gulf Cooperation Council), associate members (FATF-style regional organizations like Asia-Pacific Group), international financial institutions (IMF, World Bank, etc), observers (international organizations like UN Security Council) to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, curbing terror-financing and eliminating threats to the integrity of international financial system. Succinctly, FATF is policymaking body that forces the countries having strategic deficiencies in their economic system to bring about legislative and regulatory reforms in order to make their respective financial systems compatible with FATF Recommendations which it developed in 1999 and revised later on, in 1996, 2001, 2003 and 2012.

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