What is FATF, how it works & why it’s important for Pakistan?

FATF history, management structure & members

Financial Action Task Force (FATF) is a policy making body formed by G7 countries including USA, UK, Canada, Japan, Italy, France & Germany on 1989 in Paris.

Primarily to make regulations to control money laundering & after 9/11 also included consideration to combat terrorist financing & prevention of mass production of destructive weapons.
Starting from 8 members, fatf now have 37 countries and 2 regional organizations, including European Commission & Gulf Co-operation Council, as members.

As of now, FATF have 9 associated FATF style regional member bodies (FSRBs),that have similar objectives:

• Asia/Pacific Group on Money Laundering (APG)
• Caribbean Financial Action Task Force (CFATF) 
• Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL)
• Eurasian Group (EAG)
• Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)
• Financial Action Task Force of Latin America (GAFILAT) (formerly known as Financial Action Task Force on Money Laundering in South America (GAFISUD)
• Inter Governmental Action Group against Money Laundering in West Africa (GIABA)
• Middle East and North Africa Financial Action Task Force (MENAFATF)
• Task Force on Money Laundering in Central Africa (GABAC)

Indonesia serving as observer including list of world organizations like IMF, World Bank, Asian Development Bank, UNO & 19 others.

Members of the FATF regional bodies that are not full FATF members are entitled to attend FATF meetings as individual member-delegates of the regional bodies and to intervene on policy and operational issues.

How FATF & Its bodies work:

FATF is a recommendatory, regulating authority. Making regulations with the help of regional bodies. Keeping suspicious countries/ organizations under observation, popularly known as grey list. There is only 2 countries right now, in black list, including Iran & North Korea. Black list countries can face strict financial, trade & international relation sanctions.

FATF regulations, standards & publications:

FATF have issued 40 rules set for money laundering, which then added by 9 more rules on counter terrorism finance, making up total tally to 49.

History with Pakistan & Why FATF matters to Pakistan:

Pakistan is a member of APG, regional member body of FATF. FATF showed concerned about strategic deficiencies in AML/CFT measures by Pakistan in 2008, in 2009 APG & World Bank conducted mutual evaluation.

Pakistan 1^st time included Pakistan on its observance list during 2013-2016 & after satisfied performance Pakistan got cleared. In March 2018, FATF took Pakistan under observation again. On October 23, 2020, after giving satisfactory remarks, FATF further extended Pakistan observation till 21^st February 2021, as Pakistan fulfilled 21 out of 27 points.

These developments are important as FATF clean chit can improve outer look & perception about Pakistan. Hence Pakistan can get more financial advantage & trade from developed economies. Further international lenders can relax bindings for Pakistan, ultimately which then ease country economy.