Pakistan given three months to fix banking system or be ostracised

The international Financial Action Task Force (FATF) has given Pakistan up until June to fix the blunders with its banking sector or be put on its grey list and be cut off from global banking. The decision came following the inability of the country to put rules in place to curb money laundering and terror financing. The country was able to delay going on the grey list this February at a summit in France, but it would be given no other chances when they meet again in three months.

FATF monitors two major areas: money laundering and terror financing and has put laws in place for countries to adhere to, but Pakistan is failing at most of them. The executive director of the Centre for Research and Security Studies (CRSS) Farrukh Saleem admitted that his country was far below expectations and was putting the nation at risk.

“As far as the repercussions [for being put on the FATF grey list] are concerned, no country in the world can live in isolation – it’s a global village now,” he said. “Our imports are worth approximately US$55 billion, exports worth US$20 billion, with around US$20 billion worth of remittances. So roughly there’s US$100 billion worth of business that involves Pakistan – and all of this is through banking channels.

“Once a country is on the grey list, all banking channels are put under scrutiny. This would result in constant delays in transactions. And there is a chance that many banks would simply refuse to do business in Pakistan.”

Even without the grey list, Pakistani banks are already facing repercussions. Habib Bank was forced out of the U.S. last year for having loopholes that allowed for financing terror activity. Currently, there are only two countries on the black list – Iran and North Korea.