The Ministry of Commerce announced on Wednesday that Pakistan has been removed from the European Union’s (EU) “High Risk Third Countries” list. The EU had previously added Pakistan to the list in 2018 due to strategic deficiencies in its anti-money laundering and counter-terrorism financing frameworks. This resulted in additional regulatory burdens on obligated entities within the Union and created obstacles in legal and financial transactions with Pakistani individuals and entities. However, the recent decision means that obligated entities such as financial institutions, credit institutions, and tax advisors will no longer be required to apply enhanced customer due diligence while conducting transactions with Pakistani individuals and legal entities.
The EU’s High Risk Third Countries list is created to identify countries that pose significant threats to the financial system of the Union and the proper functioning of the internal market due to strategic deficiencies in their national AML/CFT regimes. Once a country is added to the list, additional measures are applied to financial transactions involving that country, such as increased customer due diligence requirements, enhanced monitoring of transactions, and restrictions or prohibitions on certain types of financial transactions.
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Pakistan’s removal from the list is expected to reduce the cost and time of legal and financial transactions by Pakistani entities and individuals in the EU and increase the comfort level of European economic operators. The EU delegation in Pakistan described it as an “important positive step” for the country. The EU delegation in Pakistan called it an “important positive step” for the country, while Pakistani Foreign Minister Bilawal Bhutto Zardari tweeted that Pakistani businesses and individuals would no longer be subjected to enhanced customer due diligence by European legal and economic operators. Federal Minister for Climate Change, Sherry Rehman, credited Foreign Minister Bilawal Bhutto Zardari for Pakistan’s diplomatic success in being removed from the list. Last year, the United Kingdom also removed Pakistan from its “high-risk third countries” list through a statutory instrument, recognizing Pakistan’s efforts to improve money laundering and terror financing curbs.