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Signature Qualification CA that Empowers to Lead PAKISTAN Cover Story Due to intense pressure from international regulators to guard against money laundering and terrorist financing, foreign banks have become reluctant and have been withdrawing from high risk countries and especially those under grey list. In such a situation, these foreign banks might decide to pull out from Pakistan also. A gloomy economic outlook outweighs the economic benefits. Even if any continues somehow, they will carry out extensive scrutiny of every single transaction that takes place would keep the expatriates in order to avoid the risk of violations relating to money laundering and terrorist financing. This will also entail additional cost (extra charges passed away from sending money to the country on due diligence performed on every transaction) and time to the economy. Large banks like Citibank, Deutsche Bank, Standard back to Pakistan. Potential Chartered Bank and others will suspend credit lines, that is, that they will not accept Letter of Credits (LCs). Opening LCs will become a challenging investors would also be task to some extent. Due to intense pressure from international regulators to guard against money laundering and terrorist financing, foreign banks discouraged to bring have become reluctant and have been withdrawing from high risk countries and especially those under grey list. In such a situation, these foreign banks about new investment and might decide to pull out from Pakistan also. This way, there will be a decline in foreign transactions and foreign currency inflows and that would result business into the country. into an already larger current account deficit and fiscal imbalances. Such a move would unfavourably reflect upon the exchange rate also which is already under pressure due to dwindling State Bank foreign exchange reserves. According to an expert on Pakistan economy, there is a chance that the country might suffer a rating downgrade by multilateral lenders such as International Monetary Fund (IMF), World Bank, Asian Development Bank (ADB) and it may also lead to a reduction in risk-rating by global credit rating agencies like Moody’s, S&P and Fitch. With the downgrading by rating agencies, accessing funds from international lenders would become an expensive option on which the economy is usually dependent upon. Also, it would affect the interest rate at which the country and local companies may be able to borrow from other countries and banks. With increased risk assessment and a combination of all of these factors, local banks would also increase their interest rates for local borrowers, thus, making the loans costlier. If all of this anticipation comes to reality, it might pave way to a significant fall of stock market. Foreign remittances would also come under great burden and there might be a sharp decline in that area also. A gloomy economic outlook would keep the expatriates away from sending money back to Pakistan. Potential investors would also be discouraged to bring about new investment and business into the country. The trust factor gets shaken and reputation of the country comes at stake. The clock is ticking, Pakistan Conclusion has a strict timeline of 15 Overall, the FATF grey list is definitely never good for the country and its economy. Weak financial systems and controls desperately needs to be months defined by FATF improved and aligned stringently with the international financial standards in order to curb the menace of money laundering and terrorist financing to tighten up its AML/CFT regimes. The clock is ticking, Pakistan has a strict timeline of 15 months defined by FATF to tighten up its AML/CFT management; otherwise, the grey management; otherwise, list is a clear pathway to the black list. the grey list is a clear The writer is a chartered accountant working as partner Audit and pathway to the black list. Assurance at Parker Randall-A.J.S. Chartered Accountants, a member firm of Parker Randall International. 8 The Pakistan Accountant July - September 2018 July - September 2018 The Pakistan Accountant 9