Money Matters

Grey list

February 26, 2018
By Mehtab Haider.

The possibility of the Financial Action Task Force (FATF) putting Pakistan in the grey list in June this year has increased, making it abundantly clear that Islamabad needs to take corrective measures to combat terror financing.

Insight

The possibility of the Financial Action Task Force (FATF) putting Pakistan in the grey list in June this year has increased, making it abundantly clear that Islamabad needs to take corrective measures to combat terror financing.

Confusion about the FATF decision in Paris to watch Pakistan as a terror financier has come at a time when the country is heading towards political transition. In the past, Pakistan’s economic managers claimed that they graduated from the grey list by putting in place the required legislative reforms on the front of Anti-Money Laundering (AML) laws. The laws were put in place with the approval of the parliament. However, what is being forgotten at this stage is that those steps were taken when Pakistan was not in the limelight on the global horizon.

The situation is different now, and various developments occurring at the geopolitical level in this part of the world have turned the country into a focal point. This state of affairs has perturbed many of the country’s foes, thus further increasing the pressure on Islamabad to devise a strategy that can steer Pakistan out of this difficult situation.

Earlier, Donald Trump was not the President of the United States of America when Pakistan graduated from the grey list of FATF in 2015, and the China-Pakistan Economic Corridor (CPEC) was not running at an accelerated pace.

Now, Islamabad has no option but to align itself with the changing new realities at the global and regional fronts and tackle the complex situation accordingly. Fine tuning the strategy to be presented before the 37 FATF members in the coming meeting in three months is the first step. Satisfying the members with the strategy is another. Dillydallying will not work anymore and the managers must pull their act together.

The FATF Plenary and Working Group held its meet from February 18 to 23 in Paris and it was simply shocking for Pakistani negotiators when US and its western allies passed a resolution for inclusion of Islamabad into the grey list during the second round of parleys. This happened despite striking an agreement during the first round by showing satisfaction about the steps taken by Pakistan for combating terror financing.

In the first parlays, after hectic deliberations, an agreement was reached between Islamabad and the FATF member countries that Pakistan will be given three more months for compliance on the allegations of terror financing and money laundering for which countries like China and Turkey had played key role.

It was decided that if Pakistan does not do the requisite, it may have to stand in the list of countries with links to terrorist outfits with a lot of bad consequences.

With this agreement, there was a sigh of relief in the Pakistani camp because the co-chair of the first round of talks belonging to one western country had assured Islamabad’s delegation that they had obtained three months relaxation for tabling fresh compliance report and nothing more would be done at the FATF forum.

After getting this assurance, Pakistani delegation reported back to Islamabad following which Foreign Minister Khawaja Asif tweeted about the success of the country at FATF. Even the Advisor to Prime Minister on Finance Miftah Ismail took his return flight with satisfaction that everything was going smooth.

However, when he landed in Dubai he was informed by the Pakistani delegation at FATF that things had turned out against the country during the final day of the meeting when the US tabled a resolution and it was passed, posing a threat for inclusion into the grey list.

According to the details, seven countries, led by the US and its main allies pitched a resolution in the second round of FATF meeting to put Pakistan in the watch list, while the other countries kept mum. As per the resolution passed in the second round, Pakistan “will” be slipped into the grey list in June.

Though Pakistan will have to further fine tune its report on money laundering and terror financing for appraising the world about the steps taken by Islamabad to curb this menace during the next three-month period, falling into the grey list “seems unavoidable”.

Negotiators, who participated in the FATF meetings on behalf of Islamabad, are simply clueless as to how representatives of the western countries backtracked from their commitment struck in the first round of talks.

It is evident that the threat can jeopardise progress on some fronts, which was made after putting in a lot of efforts to get out of the grey list in 2015. Military establishment and the civilian leadership have to come on one page and evolve a consensus on taking action against terror organisations against which the United Nations passed resolution 1267.

Pakistan remained in the grey list from 2012 to 2015. It was the period when the country struck the International Monetary Fund (IMF) programme, launched international bonds and obtained loans from the World Bank and Asian Development Bank (ADB). Therefore, officials claimed that it would not affect their efforts for undertaking usual business with other lenders and agencies.

This laid back attitude, and not taking corrective steps in the months ahead of the FATF meeting, as well as the premature statement from the Pakistani side has damaged the country’s stance, pushing Islamabad on the verge of slipping into the grey list again, which should have been avoided with the support of other friendly countries.

For damage control and to avoid the FATF grey list, Islamabad would have to further muster support among the 37-member countries of the task force. The managers would also have to keep it in mind that the next general elections are around the corner and the country is also in deep financial straits, especially on the external front.

With this turmoil on the economic front, and the increasing tension between the judiciary and the ruling party, Pakistan’s difficulties at the external front are increasing. There is no time left now for running the country without evolving a consensus on key internal and external issues.

The challenge is enormous and time short. There is need to proceed ahead for the sake of saving Pakistan instead of plunging into the trap of isolation at this critical juncture of history.

The writer is a staff member