October 18, 2019

Pakistan Avoids FATF Blacklist, Iran Again Gets More Time to Address Issues

By Samuel Rubenfeld


The Financial Action Task Force (FATF), the global standard-setter for anti-money laundering and counter-terrorism financing (AML/CFT) policy, “expresses serious concerns” about Pakistan but didn’t put the country on its blacklist, and gave Iran until February to avoid stiffer penalties. 

FATF ended its October plenary on Friday amid widespread speculation that Pakistan could be placed on the body’s blacklist for its failure to fully address its risks for terrorism financing, but it decided not to do so, acknowledging some recent improvements. Pakistan has addressed five of the 27 action items raised by FATF, with varying levels of progress on the others, FATF said.

“The FATF strongly urges Pakistan to swiftly complete its full action plan by February 2020,” it said. “Otherwise, should significant and sustainable progress not be made across the full range of its action plan by the next [p]lenary, the FATF will take action,” including the body potentially calling on jurisdictions to conduct extra due diligence on any transactions with Pakistan.

Countries that fail to implement FATF’s standards risk being labeled as high-risk or uncooperative, which can lead to difficulties accessing the global financial system. The October plenary session was the first for China, which holds the rotating presidency for a year. 

FATF pulled Ethiopia, Sri Lanka and Tunisia from its watchlist. It added Zimbabwe, Iceland and Mongolia, all three of which agreed to a plan to address their deficiencies, FATF said. And FATF expressed concern about a recent injunction issued by a Brazilian Supreme Court judge that could limit the country’s ability to combat money laundering and terrorist financing, saying it’s monitoring the situation and looks forward to timely updates from the Brazilian government. 

FATF again extended its suspension of full countermeasures on Iran, but said countries have to introduce enhanced relevant reporting mechanisms or systematic reporting of transactions and implement increased external audit requirements for financial groups with branches or subsidiaries operating in Iran. FATF had threatened these measures in June; it said Friday that Iran has until February to adhere to FATF standards, or the full complement of countermeasures will be re-implemented.

Though FATF acknowledged that Iran had adopted an AML/CFT bylaw, the body has yet to review the law and said it was disappointed there were still outstanding issues.

“The FATF expects Iran to proceed swiftly in the reform path to ensure that it addresses all of the remaining items by completing and implementing the necessary AML/CFT reforms,” it said. “Iran will remain on the FATF Public Statement until the full Action Plan has been completed.” 

FATF on Friday also continued its focus on cryptocurrencies, agreeing on how to assess the implementation of its global standards on the AML/CFT risks of virtual assets. The body also said it was “actively monitoring” emerging assets such as “stablecoins,” which are digital currencies usually backed by traditional money, to consider how mass-market adoption and person-to-person transfers could potentially “cause a shift” in the ecosystem of virtual assets. 

“Together these changes could have serious consequences for our ability to detect and prevent money laundering and terrorist financing,” FATF said. “They should never be outside the scope of anti-money laundering controls.”


Kharon research

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