The looming threat of Financial Action Task Force (FATF)

Shaheen Masud

The 37-member Financial Action Task Force (FATF) has taken a decision in its Plenary held in Paris on February 23rd to place Pakistan in the “grey list”. FATF is an inter-governmental body established in 1989 with the objective to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing, proliferation of weapons of mass destruction and other related threats to the integrity of international financial system. It maintains “Grey” and “Black” lists for identifying countries with weak counter-terrorism mechanisms. It does not have any powers to impose sanctions but its listing can subject the country to intense scrutiny from regulators and financial institutions in its international transactions. FATF has developed a series of recommendations/guidelines, recognized as international standards, in order to achieve its objectives.
According to initial reports, during the February 23rd Plenary, Pakistan was able to get a three-month reprieve due to the lack of consensus on the US-British sponsored resolution to include Pakistan on the FATF “Grey list, the decision was deferred till June 2018 for further review by International Cooperation Review Group (ICRG). The danger was averted because of Pakistan’s last minute hectic diplomatic efforts and support of its close allies, China, Saudi Arabia and Turkey that bailed out Pakistan by blocking the move supported by USA,UK, Germany and France to place Pakistan on international terrorist financing “Grey list”. [Pakistan was accused of deliberately avoiding to take any action on some of the entities and individuals designated as terrorists by UN Security Council resolutions.} Apparently, the looming threat had been deferred till June.
The fact of the matter is that Pakistan has got a short respite and it would be placed on international terrorism list from June 2018. Adviser to the Prime Minister on Finance Miftah Ismail confirmed that this development took place after an extraordinary second vote session specially managed by the US.
According to US Assistant Secretary of State Allis Wells Pakistan’s move against charities linked to Hafiz Saeed was insufficient, especially when he and his radical groups remain untouched. Hafiz Saeed’s release for the sixth time from house arrest raises questions about Pakistan’s intentions. Undoubtedly, such a move is a part of broader US strategy to coerce Pakistan to do more and cut off alleged links with Islamic militants carrying out operations in Afghanistan. This uncalled for decision is a clear case of witch-hunt and arm twisting by the US as most of its concerns regarding deficiencies in Pakistan’s Counter Financing Terrorism (CFT) and anti-money laundering regime (AML) had been addressed in 2015 when Pakistan, previously on the Grey List from 2012 to 2015 was taken off from the list. More recently, a week before FATF, the amended anti-terrorism ordinance 2018, clamped a ban on Jamat-ud-Dawa of Hafiz Saeed and its offshoot Falah-e-Insaniat Foundation.
The decision of adding Pakistan to the “Grey list” will have a serious impact on Pakistan’s international transactions, in addition to increased cost of domestic and international business. It is likely to hit Pakistan’s $300 billion strong economy as it would become harder for foreign investors to do business with Pakistan. Investors will demand a much higher rate of return and multifaceted financing organizations would add risk premiums on any money borrowed. Other likely repercussion would be expensive borrowing from international debt market, decline in foreign currency inflows and widening of current account deficit.
During the three-month respite by the Global Watch Dog the government should intensify its already initiated efforts to tighten its noose on the UNSC banned outfits and individuals e.g. Al-Qaida, Tehreek-e-Taliban (TTP) Lashkar-e-Jhangvi (LeJ) Jamat-ud-Dawa (JuD) Falah-e- Insaniat Foundation (FIF) and Lashkar-e-Taiba (LeT). In conformity with UN Resolution 1267, their bank accounts along with the movable assets of proscribed organizations should be seized. Under the cover of the latest amendment in its anti-terrorism ordinance 2018, subject to political will, the authorities will be able to take appropriate action against individuals and organizations banned by UNSC.
Although Pakistan has established legal and regulatory framework to meet its commitment under the Action Plan submitted to FATF in 2009, it is high time to review its performance and position relating to various points raised in mutual Evaluation Report. Ironically, no country has a perfect AML/CTF system. In Pakistan’s case legislative and institutional system exists but there is dire need to strengthen and improve the investigation and prosecution aspects and to plug in the loopholes/contradictory provisions of law hampering prosecution of offenders. The government should take effective steps to conform to FATF guidelines for improvement of its AML/CFT systems. These include, among others, legislative actions to criminalize money laundering and terrorist financing, harmonizing criminalization of offenders across different laws, developing and implementing procedures for freezing and confiscation of assets, ensuring the effectiveness of prosecution framework, developing international best practices with support of international organizations.
The FATF fiasco should be an eye opener for Pakistan. The dismal state of our relations with the US has also been manifested and the government should chalk out a more pragmatic foreign policy. The impression that Pakistan stands diplomatically isolated will send wrong signals, hence there is need to intensify our efforts. Our foreign policy priorities need to be revisited according to objective realities .The FATF saga also shows the lack of seriousness of the government and politicians as this important issue needed to be debated before Paris meeting. In view of the fact that the general election is round the corner, before the installation of the caretaker government this issue needs to be debated openly by Parliament, think tanks and media.
–The writer is a freelance columnist, based in Islamabad.

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