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PAKISTAN’S FATF DILEMMA

In its recent plenary, held virtually from 21st to 25th of June, FATF has decided to keep Pakistan in its grey list till it addressed the single remaining item on the original Action Plan agreed in June 2018 when the country was grey-listed. Though the FATF president, Dr Marcus Pleyer, praised Pakistan’s role in making a significant progress by implementing 26 out of 27 items on the plan of action yet he maintained that item on financial terrorism still needed to be addressed that concerned the ‘investigation and persecution of senior leaders and commanders of UN-designated terror groups’.
Back in 2018, Pakistan was given 27 recommendations to chalk out a plan to bring policy reforms and develop mechanism to counter ML and TF as per the given guidelines. After coming into power, the PTI government faced serious problems related to economy, i.e. low foreign exchange reserves and decreased foreign direct investment (FDI). In order to reset the economy and bring it back on track, it went for the 12th IMF package. Similarly, it also took vigorous steps to get the work done given in the FATF’s Action Plan in order to lessen the pressure on economy.
Till October 2020, Pakistan could achieve only 24 out of total 27 items through taking strong legislative efforts and amending at least 14 existing laws to comply with FATF’s recommendations. Out of these, three bills that were passed are worth mentioning. Firstly, the Islamabad Capital Territory Waqaf Properties Bill was passed to control terrorism and religious extremism by ensuring proper management and supervision of Waqaf properties in territorial limits of Islamabad Capital Territory. Secondly, the Anti-Money Laundering Amendment Bill was passed that focused on streamlining existing anti-money laundering law in line with the international standards prescribed by FATF. Through this, all the financial institutions across the country were required to investigate thoroughly their account-holders’ data to ensure transparency and avoid illegal and anonymous transactions. The third important bill was to address the issue of terror financing. It enabled LEAs to take action with the ultimate support of courts to curb terror financing. Pakistan in this way prosecuted around 30 UN, designated terrorists and their associates. Lashkar-e-Taiba (LeT) chief Hafiz Saeed and its operations commander Zaki-ur-Rehman Lakhvi along with Jaish-e-Muhammad (JeM) chief Masood Azhar and others have received convictions or are facing charges of terror-financing. It can be recalled that assets of Hafiz Saeed were frozen and madrasahs run by them were also regulated.
Thus, after all this, FATF in its meeting held in February this year, after its peer review report, stressed that Pakistan should address three strategically important deficiencies. It urged Pakistan to demonstrate that terror financing investigations be done properly, persons and entities acting on behalf of or on the direction of the designated persons must be targeted and ultimately prosecuted.
Secondly, to demonstrate that terror financing prosecutions reach effective, proportionate and dissuasive sanctions.
Lastly, to demonstrate that effective implementation and targeted financial sanctions against all designated persons have been brought to justice.
Pakistan, in this way, took very effective measures and just in four months till the month of July achieved 2 goals. Despite substantial progress on the original action plan, Pakistan was still put on the grey list when the outcome of FATF plenary was published in previous month. To some, it was expected as the work on remaining item was not done and to others, it was a bolt from the blue. The former see it as an opportunity to intensify the implementation of action plan to prove to the international community that Pakistan is a responsible country and will not hesitate to bring reforms. They support their argument by quoting the figures given by State Bank of Pakistan that after the implementation of FATF plan of action, remittance rose to all-time high of 2.8 billion, 26% higher than a year ago. The latter, however, see it as a political manoeuvring done by rival countries especially India and America to malign Pakistan in the comity of nations. Therefore, it is not an entirely misplaced belief that FATF is used as a tool to put pressure on countries like Pakistan as there are examples where countries have been delisted even though they did less than what Pakistan did. Even European countries are notoriously famous for being the major hubs of illicit money. Statement by the foreign minister of Pakistan does carry some weight when he said, “It needed to be looked into whether FATF was being used for political purposes, some powers desire to keep the sword of FATF hanging over Pakistan.” He further said that it is yet to be determined whether FATF is either a technical or a political forum. Some political commentators also refer to the situation in Afghanistan as the determining factor in deciding about Pakistan’s fate in FATF.
Furthermore, the most devastating outcome of the July session for Pakistan was that it received another six-point plan of action that mainly deals with money laundering. The new plan of action that has been given by the Asia Pacific Group states that Pakistan has to enhance international cooperation and demonstrate that assistance is being sought from foreign countries in implementing United Nations Security Council (UNSC) resolutions on money laundering and terror financing. Delisting will only occur after Pakistan completes both plans of action, i.e. addressing the single remaining item on the original action plan and six additional items added by APG.
Commenting on what will happen next and how the remaining goals will be achieved, Hammad Azhar, federal minister for industries and production, said that in the original action plan, Pakistan was declared high-risk country in terror financing where Pakistan has done a lot and in next few months, one remaining item will also be completed. On the other hand, new plan of action, according to him, is less challenging and Pakistan was declared as a low-risk country and it too will be completed within a year.
It is clear from the given facts that Pakistan in the next few years will manage to get out of the grey list and when it does so, the following positive implications are expected. Firstly, if Pakistan makes strong anti-money laundering and terror- financing laws and implements them on given time and prosecute the responsible, Pakistan’s banking system along with its financial markets will get improved. It will boost investors’ confidence to invest in Pakistan and ultimately beef up the government’s narrative of fighting corruption. Pakistan’s overall economy will get better as the people will start trusting the institutions. Thus, Pakistan can make better use of its diplomatic channels as well by getting support from like-minded countries in order to face the belligerent powers that are adamant to destabilize Pakistan.
The writer has an MPhil degree in Political Science and takes interest in history, politics and current affairs.