The Financial Action Task Force (FATF), which met recently in Paris, has decided to keep Pakistan on its ‘grey list’ until February 2020.
The FATF monitors countries suspected of aiding terror attacks and imposes major financial constraints on them when they are found in violation of international laws.
Pakistan was put on the FATF ‘grey list’ in June last year, which is one step short of the agency’s ‘black list’. Once on the black list, a country faces severe economic sanctions. For a country like Pakistan, already struggling with a major economic crisis, being on the black list would cripple its economy.
The terror financing watchdog monitored the progress of 15 countries on its watch-list, including Pakistan, which was effectively given a final warning by the FATF to comply with its agreed proposal or risk being blacklisted in four months’ time.
Even though Pakistan avoided being relegated to the black list during the five-day summit last week, FATF President Xiangmin Liu was categorical in demanding that Islamabad must ‘do more’.
“Despite a high-level commitment… Pakistan has not made enough progress. If by February 2020 the country has not made significant progress, we will consider further actions which potentially could include placing the country… on the blacklist,” Liu said.
Pakistan was formally placed on the grey list in June 2018, when it was given 15 months to implement a 27-point action plan by the FATF, failing which Islamabad would be blacklisted.
Iran and North Korea are currently the only countries on the FATF blacklist.
And with a minimum of three votes required from the 39 members of the counter-terror watchdog, diplomatic sources have said that Pakistan had its bases covered during the United Nations General Assembly (UNGA) meeting in New York last month.
“Prime Minister Imran Khan had got support from both Turkey and Malaysia on both the Kashmir and FATF issues. So we knew that there was no chance of us getting blacklisted this time around. The latest FATF warning is harsh, but we’re looking at it as an incentive to continue to make the improvements that we have made,” a senior Pakistani diplomat said.
With Turkey and Malaysia voting for Pakistan, Islamabad knew that it only needed China’s vote to avoid the black list. With the current FATF president coming from with China as well, it was felt that Beijing would come to Pakistan’s rescue. However, that wasn’t needed at the Paris summit.
“China is presiding over the FATF and the chair has the casting vote, which is only exercised at a critical juncture. So some other country has bailed out Pakistan, possibly one from the European Union,” Muhammad Amir Rana, a senior security analyst and director of the Pakistan Institute for Peace Studies (PIPS), said.
“But even if it had got down to the casting vote, China was going to vote in Pakistan’s favor. However, it would be hard for these countries to vote for Pakistan [again] if the [FATF] action plan isn’t followed,” he added.
The FATF outcome is seen to have stemmed from successful diplomatic lobbying by Islamabad.
“Despite India’s best efforts to blacklist Pakistan, Prime Minister Imran Khan has been successful in thwarting those attempts and showcased the true image of Pakistan to the world,” the Prime Minister’s Special Advisor on Broadcasting and Information Firdous Ashiq Awan said.
But for many observers, Pakistan’s true success lay in the fact it dodged the black list despite the FATF rating Islamabad’s progress on 22 of the 27 points of the mutually agreed plan as “unsatisfactory”.
The FATF said Pakistan was only ‘largely compliant’ on five of the 27 points.
And with Islamabad scheduled to file another progress report in December for consideration in the meeting in February, Pakistan has a couple of months to address concerns raised by the Task Force.
The FATF wants Pakistan to show understanding of terror-financing risks, as well as applying sanctions in cases of money-laundering and terror financing; and for it to identify and act against illegal financial transactions and currency movement. It also wants improved inter-agency coordination; a demonstration of it taking law enforcement action, including bolstering prosecutions and supporting judiciary on terrorism cases, as well as imposing sanctions on all designated terrorists.
Two main tasks
Experts say Pakistan has two main tasks to get off the grey list. The first is enhancing its mechanism to curb financial misappropriation by fixing banking loopholes, while the second is setting up a security plan that takes action against all outfits advocating terror, without any discrimination.
Pakistan has been largely compliant on five of the 27 points: national coordination; anti-money laundering efforts; confiscation and provisional measures; record keeping and correspondent banking.
Former caretaker finance minister Salman Shah said: “A major problem for Pakistan is that a lot of our economy is still undocumented. That, and limitations in our banking system, have enabled terrorists to move money around without much hindrance. However, I feel progress has been made in strengthening our banking system over the past year.
“However, more scrutiny is needed over freezing the assets of the designated terror groups, which will help curb terror financing,” he said.
JeM and LeT
Among the groups regularly cited during the FATF meeting are Jaish-e-Muhammad and Lashkar-e-Taiba, which target India.
A JeM-orchestrated bombing in Pulwama resulted in a dogfight between Pakistan and India in February this year. It also led to Pakistan launching a crackdown against JeM and other banned outfits in March, arresting 44 members affiliated with proscribed organizations. Similarly, LeT chief Hafiz Saeed has been under house arrest since July.
After New Delhi’s decision to revoke Articles 370 and 35A of the Indian Constitution threatened to bring Pakistan and India to the brink of war over the disputed Jammu & Kashmir again, PM Khan continued to urge residents of Pakistan administered Kashmir not to cross the Line of Control.
Many feel that the threat of FATF blacklisting and the many sanctions that it could bring has pushed Pakistan to abandon the use of jihadist outfits as strategic assets. However, others remain skeptical.
“There are still certain groups with whom we’re not as strict as we ought to be. On the surface they might have dismantled everything, but there’s still a presence in some form or the other. There is a policy to ensure that [jihadist groups] come back into the mainstream [later],” Lieutenant-General Talat Masood, a former secretary of Pakistan’s Ministry of Defense Production, said.
Kunwar Khuldune Shahid is a Lahore-based journalist and a member of 101Reporters, a pan-Asia network of grassroots reporters.