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October 11, 2019

The FATF conundrum

Pakistan was put on the grey list by the FATF in June 2018 and had given 27 action plans till September 2019 to comply for coming out from it.

The Asia Pacific Group of the organization was assigned the task to monitor Pakistan’s progress on the action plans, and submit a report to the parent body. Since then, Pakistani authorities have held a number of review meetings with the group, the last one in August in which a high-level delegation led by the economic affairs minister presented an exhaustive report on measures taken to comply with the FATF action plans.

More: Can APG's report help Pakistan extricate itself from FATF’s grey list?

Media reports suggest that the group has shared its findings with Pakistan, highlighting Pakistan’s progress positively with compliance on 36 out of 40 parameters, while the Joint Working Group found Pakistan largely compliant on 10 points, partially compliant on another 10 points and non-compliant on seven points out of the 27 action plans given by the FATF.

The decision on whether Pakistan will be removed from the grey list, remains on it for an extended period or is downgraded to black list, is likely to be made in a plenary session of the FATF to be held in Paris from October 14-18 in light of the said report. The best-case scenario for Pakistan would be if it is removed from the grey list and included in the green list, otherwise it would create lot of difficulties for Pakistan. Even continuance in the grey list would mean downgrading by the IMF, the World Bank, the ADB, the EU and also a reduction in risk rating by international rating agencies, adding to the financial woes of the country.

The likely repercussions for Pakistan remaining in the grey list or being downgraded to the black list adequately explain why India as co-chair of the Joint Working Group of Asia Pacific Group has been striving to push Pakistan into the black list, a revelation also made by Prime Minister Imran Khan in his address to the UN General Assembly. The proposition has been corroborated by the statement of the Indian defence minister that FATF could blacklist Pakistan any time. Our Foreign Office in a statement has rightly urged the FATF to take notice of the malicious campaign by India, and previously had also brought this into the notice of the FATF members. Reportedly, a five-member delegation of Pakistan led by Minister for Economic Affairs Hammad Azhar will participate in the upcoming FATF review meeting in Paris along with top military officials, DG FMU and one representative from the Foreign Office.

Though Pakistani authorities are hopeful that because Pakistan has made impressive progress on at least 20 out of 27 action plans it has bright chances of being excluded from the grey list, the outcome would actually depend on how much support Pakistan can muster diplomatically in the 39-member FATF.

In my considered opinion, the issue has already attained a political dimension. The very placing of Pakistan on the grey list was surely motivated with a view to keep Pakistan under pressure. One must not forget that Pakistan was put on the grey list in June 2018 when the FATF adopted a US-sponsored motion to have Pakistan grey-listed and the move as usual was supported by Western allies like Britain, France and Germany among others. It was expected in the backdrop of the nosedive in relations between Pakistan and the US since the announcement of the new policy on South Asia and Afghanistan by President Donald Trump and its outright rejection by Pakistan.

It was the most unfortunate development in view of the fact that Pakistan as a US had suffered the most in the war against terror. The reality is that Pakistan has been a sincere partner in the war on terror and has not only dismantled the infrastructure of all the terrorist outfits based on its territory but is also faithfully engaged in eliminating the remnants of their supporters within the country. It has also taken all possible administrative and legal measures to check and block the sources of funding of terrorist organizations.

Pakistan had already promulgated a presidential ordinance to amend the anti-terror legislation in order to include all UN-listed individuals and groups in the national listings of proscribed outfits and persons. The Securities and Exchange Commission of Pakistan (SECP) also took measures in keeping with the FATF regulations and issued the Anti-Money Laundering and Countering Financing of Terrorism Regulations 2018. The government had also chalked out a comprehensive plan to eradicate terrorist financing which was shared with the international watchdog. The FATF decision was reflective of the US rhetoric of ‘do more’. It was also indicative of how much influence the US could exercise on world bodies like the FATF.

It is pertinent to point out that a spokesperson of the Chinese foreign ministry while referring to FATF decision said: “In recent years Pakistan has actively taken measures to strengthen financial supervision and crack down on terrorist financing and made important progress. We have always believed that the great efforts and sacrifices made by the Pakistan government and people for the fight against terrorism are obvious to all. The international community must give full recognition and trust to these efforts and treat those efforts objectively and impartially instead of relying on criticism and pressure” The statement adequately unravelled how decisions were taken under pressure at the global forums.

However, in view of recalibration of relations between the US and Pakistan and the concrete and credible steps taken by Pakistan ever since placement in the grey list, it could be genuinely hoped that there will be positive outcome at the Paris meeting. Pakistan, however, will have to do intensive lobbying to win the support of members of the FATF and to thwart the Indian designs. In this regard support of China, Malaysia and Turkey would be very crucial as pointed out by Hammad Azhar.

The writer is a freelance contributor.

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