Pakistan and the FATF: The Sword Still Dangles

Pakistan is in deep trouble. It was and continues to be under the penetrating gaze of the global money laundering and terrorist financing watchdog- the Financial Action Task Force (FATF). To prevent organized crime, terrorism and corruption, FATF has formulated a set of recommendations or standards that each country is supposed to comply with.

Between 16-21 February 2020, the FATF review week was held in Paris. Around 800 representatives from 205 countries and jurisdictions around the world, the IMF, UN, World Bank and other important international organizations attended the conference. At the conclusion of the plenary session, it was decided that Pakistan would continue on the FATF ‘grey list’. It was also given a stern warning that “All deadlines in the action plan have expired and urged Pakistan to swiftly complete the action by June”¹

Before looking at the current developments, it is pertinent to look at the chronology of events, as it is not the first time that Pakistan has been put under grey list. Pakistan has been under scrutiny of this terror watchdog and has a long history of FATF grey listing- from 2008 to 2010 and then from 2012 to 2015 for making money laundering and terror funding as its foreign policy tool to foment violence and civil disturbance in its neighborhood². Once again, Pakistan was placed on the 'Grey List' by the FATF in June 2018 and was given a plan of action to complete by October 2019 or face the risk of being placed on the 'Black List' along with Iran and North Korea. Pakistan agreed to a 27-point action plan to address deficiencies and strengthen its anti-money laundering and combating financing of terrorism standards. However, a review in January 2019 found that Pakistan had shown limited progress on the action plan. Meetings of the Asia Pacific-Joint Group (APG) a regional affiliate of FATF held in Guangzhou, China, on May 15-16, 2019 found that out of the 27 action points, as many as 18 were incomplete³. These findings were presented at the Plenary and Working Group meetings of the FATF in Orlando, Florida, on June 16-21, 2019. The FATF demanded, inter alia, actionable steps, especially against the eight proscribed outfits (Jamaat-ud-Dawa, Falah-i-Insaaniat, Lashkar-e-Tayyaba, Jaish-e-Mohammed, Haqqani Network, the Afghan Taliban, Daesh and al-Qaeda). Measures taken by Pakistan, according to the FATF, did not ‘demonstrate a proper understanding of Pakistan’s transnational terror-financing risk⁴’. On August 22, APG had placed Pakistan in the Enhanced Expedited Follow up List (Blacklist) for its failure to meet standards.

In its 22nd Annual Meeting held in Canberra from 18-23 August 2019, the APG found that Pakistan was non-compliant on 32 of the 40 compliance parameters of terror financing and money laundering. Subsequently Pakistan was further exposed, when the APG had published its annual report (Mutual Evaluation report of Pakistan). According to the report, out of FATF's 40 recommendations on curbing money laundering and combating the financing of terrorism, Pakistan was fully compliant only on one. It was largely compliant on nine, partially compliant on 26 and non-compliant on four recommendations. Despite the negative APG findings, the FATF during the plenary session held on 16-18 October 2019 in Paris retained Pakistan on its grey list and was given an extension till February 2020. Pakistan was able to dodge the blacklist with the support of China, Turkey and Malaysia.

It has yet again managed to evade the blacklisting. In fact ahead of the February 2020 review meeting of the FATF, Pakistan lobbied hard with China and USA. Foreign Minister Shah Mehmood Qureshi on 19th January 2020 was in Washington lobbying with US to get off the FATF grey list. In order to create an impression about its seriousness to implement FATF’s plan of action before the FATF Plenary in Paris from 16-21 February 2020, Pakistan convicted the Jamaat-ud-Daawa chief Hafiz Saeed. This action by Pakistan implicitly appears to be a tactical ploy, rather than a serious measure. In fact rather than taking any concrete and serious measures against terror financing and funding, Pakistan continues to adopt perfunctory steps to allay the interests of International community.

However, in this last review meeting of the FATF the participating countries including China and Saudi Arabia sent a stringent note to Pakistan to accomplish its commitments on action against terror financing before June 2020. The decision was taken to keep Pakistan in the grey list and that the final decision would be taken in June 2020 on whether further actions were required. As reported by the News International, Pakistan must comply with 13 points of 27 point action plan in order to come out of the grey list: . (1) Pakistan will have to demonstrate effectiveness of sanctions including remedial actions to curb terrorist financing in the country; (2) Pakistan will have to ensure improved effectiveness for terror financing of financial institutions with particular to banned outfits; (3) Pakistan will have to take actions against illegal money or value transfer services (MVTS) such as Hundi-Hawala; (4) Pakistan will have to place sanction regime against cash couriers; (5) Pakistan will have to ensure logical conclusion from ongoing terror financing investigation of law enforcing agencies(LEAs) against banned outfits and proscribed persons; (6) Pakistani authorities will have to ensure international cooperation based investigations and convictions against banned organizations(list provided to Pakistan) and proscribed persons(list provided to Pakistan); (7) The country will have to place effective domestic cooperation between Financial monitoring unit (FMU) and LEAs in investigation of terror financing; (8) Prosecution of banned outfits and proscribe persons (list provided to Pakistan); (9) Demonstrate convictions from court of law of banned outfits and proscribed persons (list provided by Pakistan); (10) Seizure of properties of banned outfits and proscribed persons (list provided by Pakistan); (11) Conversion of madrassas to schools and health units into official formations (list provided by Pakistan); (12) To cut off funding of banned outfits and proscribed persons; and (13) Pakistan will have to place permanent mechanism for management of properties and assets owned by the banned outfits and proscribed persons (list provided to Pakistan).⁵

Clearly a lot needs to be done by Pakistan to avoid getting blacklisted. “Security analysts say that Pakistani authorities are only focused on avoiding FATF's "black list" instead of tackling the issue on a long-term basis” ⁶. Pakistan has charged India for politicization and alleged that grey listing is a ploy of India to keep it under pressure to achieve their diplomatic goals.

All that India has reiterated is that Pakistan extends regular support to terror groups like the LeT, the JeM and the Hizbul Mujahideen, whose prime target is India, and has urged the FATF to ensure that such support is eliminated.

The world has by now become aware of the antics of Pakistan that despite being in financial straits it remains wedded to terrorism. The international community would have to keep up the pressure and its scrutiny of Pakistan to ensure that it complies with global standards of anti money laundering and anti terror financing.

References

1. https://www.fatf-gafi.org/publications/fatfgeneral/documents/outcomes-fatf-plenary-february-2020.html [3]
2. https://www.dawn.com/news/1418143 [4]
3. https://www.tribuneindia.com/news/archive/comment/why-pakistan-needs-to-toe-the-fatf-line-797277 [5]
4. Ibid
5. https://www.thenews.com.pk/print/629673-pakistan-must-comply-with-13-points-to-come-out-of-fatf-grey-list [6]
6. https://www.dw.com/en/pakistan-avoids-fatf-black-list-gets-stern-warning/a-50870561 [7]

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