Context:

• The global money laundering watchdog FATF or the Financial Action Task Force has decided to put Islamabad back on its terrorist financing watch list, the move that could seriously hurt Pakistan’s economy.
• However there is no direct mentioning of Pakistan in official statements but Islamabad has been put on what’s called the Grey List for not doing enough to crackdown on terror and that this will come into force in June when the body meets next.
• The resolution against Pakistan was moved by the US which wants to put pressure on Islamabad for not doing enough to comply with anti-terrorist financing and anti-money laundering regulations.

More details:

• The move is part of a broader US strategy to pressure Pakistan to cut its links to terror groups in Afghanistan.
• The move is expected to inflict serious damage on Pakistan.
• Being placed on the FATF watch list brings extra scrutiny from regulators and financial institutions which will be wary of doing business with Pakistani banks.
• It would be counterproductive to put Pakistan on the watch list as it would hurt its capability to fight terrorism.
• Also, being put back on the grey list would heighten Pakistan’s risk profile and some financial institutions would be wary of transacting with Pakistani banks and counterparties.
• Being placed on the FATF watchlist carries no direct legal implications, but brings extra scrutiny from regulators and financial institutions that can chill trade and investment and increase transaction costs.
• Pakistan was on the watch list between 2012- 2015 as well but only for money laundering.

Source:TH