FATF decision means that it would be very hard for Pakistan to get financial aid from the International Monetary Fund, the World Bank and the European Union, making its financial condition even more precarious.
The Paris-based Financial Action Task Force (FATF), a global anti-money laundering body, has given Iran a final deadline of February 2020 to implement a set of four bills to meet the standards set by the watchdog.
In its statement, the terror-financing global watchdog also said that the FATF action against Pakistan could include "the FATF calling on its members and urging all jurisdictions to advise their financial institutions to give special attention to business relations and transactions with Pakistan".
The Finance Division pointed out that during the last reporting period, Pakistan made "significant progress" in the implementation of the 27-point FATF Action Plan, which was demonstrated by the completion of nine additional action items. "The Europeans were looking for something in between".
The decision was taken at the plenary meeting of the FATF, which took place in Paris after the conclusion of the February 16-21 group meetings.
Pakistan in its report to FATF had stated that while it has completely implemented 14 out of the 27 points in the FATF action plan, it has also been partially compliant with at least 11 points.
Foreign Minister Mohammad Javad Zarif this week appeared resigned to the FATF blacklisting, accusing the United States using its maximum pressure campaign to exert influence at the FATF.
In October previous year, the FATF president had warned Islamabad to either fully implement the action plan or face the risk of being blacklisted.
The Pakistani court's judgment came ostensibly to please the FATF and western countries so that the country can exit the "Grey List", sources said.
The FATF in October made a decision to keep Pakistan on its "Grey" list for failure to curb funnelling of funds to terror groups Lashkar-e-Taiba, Jaish-e-Mohammed and others.
"The problem with India-Pakistan is that everything is seen as either a win or a loss for one side".
Despite the eyewash of Hafiz Saeed's sentencing days ahead of the financial action task force, Pakistan continues to be on the financial watchdog's greylist.
Taking note of Saeed's conviction, Alice Wells, acting US Assistant Secretary of State for South and Central Asian Affairs, had noted that the "conviction of Hafiz Saeed and his associate is an important step forward - both toward holding LeT accountable for its crimes, and for Pakistan in meeting its worldwide commitments to combat terrorist financing".
The FATF Plenary Meeting has been chaired by FATF President Xiangmin Liu of China.
Pakistan needed 12 votes out of 39 to exit the "Grey List" and move to the "White List". Although FATF is only a task force, not backed by any worldwide treaty that could make its measures binding on member countries, its listing of any country has an adverse effect on that country.
"China and other brotherly countries have supported Pakistan throughout the [FATF] process in terms of guiding the country to improve its frameworks", the press release quoted the adviser as saying.
Chinese Foreign Ministry spokesperson Geng Shuang made the revelation at a press briefing on Friday after he was asked whether China's position on Pakistan in the matter had changed. The action plan expired in early 2018.