The Financial Action Task Force (FATF), a worldwide watchdog, revealed on October 21 what many Pakistanis had thought was possible: the country’s removal from the FATF’s expanded monitoring “grey list.” Numerous positive developments came along with Pakistan’s accomplishment of 34 action items, and the elimination of “strategic inadequacies” in the areas of anti-money laundering and anti-terror financing is to be applauded. It involved a complex chain of events, from successive government contributions to the crucial role played by the armed forces in enabling successful implementation.
It’s also true that putting important lessons into perspective requires only the hard-won grey-list exit. This includes the understanding that Pakistan does have the political will and the competence to implement financial system oversight reform. Perseverance in the face of divisive political campaigning is the other lesson. As is typical of New Delhi’s behaviour, India has been pushing to use a variety of pressure measures to politicise and obstruct Pakistan’s participation in the FATF. In the future, Pakistan’s achievement in the FATF will put an end to all of those theories and will illustrate that progress comes first.
A FATF handout stated, “The FATF welcomes Pakistan’s significant progress in improving its AML/CFT regime.” It continued, “Pakistan has strengthened the effectiveness of its AML/CFT regime and addressed technical deficiencies to meet the commitments of its action plans regarding strategic deficiencies that the FATF identified in June 2018 and June 2021, the latter of which was completed in advance of the deadlines.”
The country stands to gain from the improved political commitment and long-lasting reforms that have characterised Pakistan’s transition off the grey list. Armed forces have played a crucial role in the timely implementation and greater progress on important action points. The unanimous backing of politicians and government representatives from all administrations also contributed to the grey-list exit decision, delivering a strong statement about national cohesion. Additionally, it should be noted that efforts to remove the FATF designation served to safeguard and strengthen Pakistan’s economic standing. Therefore, it has resulted in significant rewards. These developments should lead to a clearer understanding of what should make up our core interests and why national unity is essential to achieving those objectives.
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It is evident from Pakistan’s evolving progress toward its main action plan objectives that further change doesn’t require outside intervention. Legislation aimed at bolstering action plan consensus was a good reminder of the urgent initiative felt in many circles even before FATF announced Pakistan’s ground-breaking grey-list withdrawal. Pakistan has a variety of reasons to be interested in maintaining current growth. For instance, a financial system that responds to state supervision even more effectively provides helpful pushback against potential criminal activity in unrestricted areas. The public is also well aware of the problems involved with financial corruption nowadays. It is evident in a vocal public, unrestricted media, and thoroughly scrutinised political discourse.
Due to all of this, it is crucial to building on Pakistan’s regulatory reform by tightening upcoming money laundering restrictions and creating momentum for ongoing change. Moving in that direction can benefit financial openness in a democracy that is still developing.
The benefits of Pakistan’s FATF compliance have also saved us from paying for investor scepticism, significantly less robust economic growth, and brittle international alliances. Islamabad must continue to maintain regular communication with the Asia Pacific Group (APG), a regional affiliate of the FATF, regarding the success of the 11 “immediate outcomes.” However, working effectively toward these aims provides several benefits. First, it might improve the regulatory reform culture that supports Pakistan’s financial sector, making it more resistant to organised crime and giving political parties more freedom to choose priorities. With time, if prioritised as a national goal, this system of checks and balances has the potential to put Pakistan ahead of many other nations in terms of financial transparency. Given that the perception of political and economic instability has its own set of negative ramifications for Pakistan, as well as for many other countries across Asia, it is also crucial to serving the needs of a relatively modest economic profile.
Here, more interaction with the APG should capitalise on Pakistan’s advantages. The state’s ability to regulate should be strengthened even more, and it should be expanded to include parts of the financial system that are particularly important to long-term interests.
Read More: Timeline of Pakistan on FATF List
Finally, there has been a positive adaptivity to reform in Pakistan as a result of the outstanding progress made on the FATF action plans. According to a statement made by the FATF earlier this year, “Since June 2021, Pakistan has taken swift steps towards improving its AML/CFT regime and completed six of the seven action items ahead of any relevant deadlines expiring.”
Consider the years before significant FATF advancements: A stronger emphasis on non-financial businesses and professions (DNFBPs), including their oversight and regulation, was added to Pakistan’s worldwide obligations to combat financial crimes. Pakistan is now among the top-performing nations globally in terms of technical compliance with FATF requirements.
Give that some time to register. This result ought to be sufficient to support more extensive adherence to stricter financial reform. After all, once they reach a higher level of risk aversion, Pakistan’s financial industries are going to benefit in the long run.