How will FATF grey listing impact Pakistan?

FATF (representative photo) Photograph:( Others )

WION Web Team Pakistan Jun 30, 2018, 02.32 PM (IST)

Paris-based Financial Action Task Force (FATF) has recently labelled Pakistan and eight other countries "jurisdictions (states) with strategic deficiencies".

The FATF label imposed on Pakistan will lead to strict scrutiny on Pakistan further impacting its international transactions. 

After the labelling foreign banks will be unwilling to transact with Pakistani banks. 

The decline in financial transaction and foreign currency inflow will further increase Pakistan’s already large current account deficit (CAD). 

The tag has widely affected Pakistan's image due to which the country may suffer a risk downgrade by multilateral lenders such as IMF, World Bank, ADB and also a reduction in risk-rating by Moody’s, S&P and Fitch.

The labelling can harm the international financial system if the countries do not take immediate steps to stop the financing of terrorists and money laundering activities.

The other countries under the list are Ethiopia, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia and Yemen.

Pakistan had already been on the FATF grey-list from 2012 to 2015.

FATF maintains grey and black lists for identifying countries that have weak measures to counter and combat money laundering and terror financing.

The intergovernmental organisation does not have the authority or power to impose sanctions on a country found non-compliant with the required standards. 

Pakistan is the ninth country to be placed on the Paris-based Financial Action Task Force's (FATF's) "grey list", the other eight being Ethiopia, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia and Yemen.