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‘Dark Grey’ list of FATF

Topics Covered:

  1. Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

 

‘Dark Grey’ list of FATF

 

What to study?

For Prelims: FATF, Grey list, Dark Grey list, G7, About APG.

For Mains: What is Grey list and Black list, how are countries in the list affected? How does FATF’s latest move affects Pakistan?

 

Context: Pakistan is on the verge of strong action by the international terror financing watchdog FATF and the country may be put in the ‘Dark Grey’ list, the last warning to improve.

Pakistan is on the verge of strong action by FATF, given its inadequate performance, whereby it managed to pass in only six of 27 items.

 

What is Dark Grey list?

According to FATF rules there is one essential stage between ‘Grey’ and ‘Black’ lists, referred to as ‘Dark Grey’.

  • ‘Dark Grey’ means issuance of a strong warning, so that the country concerned gets one last chance to improve, another official said.
  • ‘Dark Grey’ was the term used for warning upto 3rd Phase. Now it’s just called warning — that is the 4th phase.

 

Background:

Pakistan was placed on the Grey List by the Paris-based watchdog in June last year and was given a plan of action to complete it by October 2019, or face the risk of being placed on the black list with Iran and North Korea.

 

Implications:

If Pakistan continues with the ‘grey list’ or put in ‘Dark Grey’ list, it would be very difficult for the country to get financial aid from the IMF, the World Bank and the European Union, making its financial condition more precarious.

 

Pakistan and state-sponsored terrorism:

  • Pakistan has been accused by neighbouring countries India, Afghanistan and Iran and other nations, such as the United States, the United Kingdom, and France of involvement in terrorist activities in the region and beyond.
  • It is also alleged that Money is transferred to terror organization via Pakistan army.
  • It has been described as a safe haven for terrorists by western media and the United States Defense Secretary. It has been time and again proved that Pakistan has been supportive to several terrorist groups despite several stern warnings from the international community
  • Besides, the government of Pakistan has been accused of aiding terrorist organisations operating on their soil who have attacked neighbouring India.
  • However, Pakistan denies all allegations, stating that these acts are committed by non-state actors.

 

About FATF:

What is it? The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 on the initiative of the G7.  It is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas. The FATF Secretariat is housed at the OECD headquarters in Paris.

Objectives: The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.

Functions: The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures and promotes the adoption and implementation of appropriate measures globally.  In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.

 

Sources: the Hindu.