Pakistan — a galling victim of FATF’s realpolitik ? | By Syed Qamar Afzal Rizvi


Pakistan — a galling victim of FATF’s realpolitik ?

THE FATF‘s decision— on June 25— of staying Pakistan’s name on its grey list despite Pakistan’s exemplary reforms regarding AML regime — is a clear manifestation of its realpolitik role vis-à-vis Pakistan.

Given the new measures and initiatives of anti-money laundering (AML) so far taken by Pakistan, it was presumed that Pakistan’s name could come out of FATF’s grey list. Since June 2018, Pakistan has been facing the task of clearing its name from the FATF’s grey list.

The steps so far taken by Pakistan, included introducing new laws, amending some existing ones, taking serious action against some proscribed organisations, and other glaring AML initiatives taken on FATF’s demand.

Marcus Pleyer of Germany assumed the position of President of the FATF on 01 July 2020, he succeeded Xiangmin Liu of the People’s Republic of China.

Accordingly, the global watchdog had to review Pakistan’s progress on the 27-point action plan for addressing anti-money laundering and terror financing in its plenary session that started on June 21-2021. Importantly, the FATF’s assessor analysis is purely based on the technical nature of checklists.

In this regard, the adversaries can rightly challenge the positive findings as well as negative and critical opinions about the assessors’ report. In the same vein, friendly allies can also question negative opinions

“When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolving swiftly the identified strategic deficiencies within agreed timeframe and is subject to increased monitoring.

This list is often externally referred to as the ‘’grey list’’. FATF identifies additional jurisdictions on an ongoing basis that have strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing’’.

Against this backdrop, recently, FATF started its work to identify new countries with strategic AML/CFT deficiencies and to prioritise the review of listed countries with expired or expiring deadlines. Hence, the other listed jurisdictions were given the option to report.

In order to meet the compliance of the UNSCR-1267, UNSCR1373, and the NACTA in collaboration with FBR, the State Bank of Pakistan, FIA, and the Securities and Exchange Commission of Pakistan, all these institutions have been engaged in taking operations against illegal movement of money within Pakistan.

Not only this, but these institutions also choked the financial lifelines of terrorist organizations and curbed Hawala/Hundi methods of laundering money.

Clearly, there has been an improved enhancement within the Law Enforcement Agencies (LEAs) in ensuring law and order within Pakistan.

For the record, earlier to 2017, more than 150 cases of cash washing and fear-based oppression financing have been enrolled by the state, though Pakistan’s money-related specialists have to begin a topical survey of the stock showcase brokers as well. Hence, a few cases of non-compliance were properly enrolled.

And however, money/value transfer services (MVTS) — have been another major asset for cash flowing (based on insights data the high-risk regions with these MVTS) — are under strict monitoring.

In tandem, The Security and Exchange Commission of Pakistan (SECP) had accelerated its efforts to counter money laundering as well as terrorism financing.

Where some of its efforts not only include the Memorandum of Understanding (MoU) with NACTA to enhance coordination level to take initiatives for combating money laundering, but also creating awareness amongst the general public and the financial institutions about the latest AML laws and Countering Terrorism Financing framework— adopted by states as per the recommendations and concerns of the FATF.

In order to satisfy the FATF members ahead of FATF’s virtual plenary meeting, Islamabad has already approved new rules.

Thus, the AML (Forfeited Properties Management) Rules 2021 and the AML (Referral) Rules 2021 were approved by Pakistan’s Federal Cabinet last month.

Understandably, these drastic measures were aimed at addressing the three outstanding items of FATF’s action plan-focusing on 27 point agenda.

Moreover, the Pakistani government had taken unprecedented measures through a series of legislative, institutional and administrative actions in the domain of anti-money laundering and countering the financing of terrorism.

“These actions, which have also been reported to the FATF and shared with the EU, have been widely acknowledged by the international community.

The near completion of Pakistan’s FATF Action Plan through 26 out of 27 action items is a testament to Pakistan’s commitment and tangible actions in the AML/CFT domain,” pointed out the Foreign Office.

Currently, the Asia Pacific Group on money laundering (APG) gave its findings of Pakistan’s second Mutual Evaluation follow-up Report on 2 June 2021.

As per the report, Pakistan achieved a compliant/largely compliant rating in 31 out of 40 FATF’s recommendations in technical compliance.

Arguably, the vertical, unilateral and selective application of the FATF rules and regulations remains a sensitive issue for the developing economies facing hardship with regard to economic structure and goals amid the imbruing challenges posed to them because of the impending Covid-19 international economic order.

AS such, FATF did not take any action against India despite India’s clear involvement in money laundering—sufficiently endorsed by the facts revealed by the EU Disinfo Lab.

Needless to say, with the grey list ranking or benchmarking, a state’s position becomes worse and thus affects its development and international partnerships promoting financial and economic development as well.

These rankings have drastically affected Pakistan’s global stature. For a developing economy like Pakistan, the grey list sanctions on Pakistan caused a fatal effect on the economy of Pakistan.

Meanwhile, many Pakistanis are clearly apprised of Washington’s dominance over the decision-making process of the world’s biggest economic institutions—the world bank, the IMF, and the FATF.

Therefore, the analysts in Pakistan are sceptical that since Pakistan has justifiably and promptly refused the US demands to provide a military base for cross-border operations from Pakistan’s soil; to mount the expectations that the FATF could pass a fair judgment —to convert our grey-list status into the white list so far seems nothing but hope against hope scenario.

With FATF’s current ruling, it remains no more a mystery that Pakistan has become a victim of FATF’s realpolitik.

—The writer, an independent ‘IR’ researcher-cum-international law analyst based in Pakistan, is member of European Consortium for Political Research Standing Group on IR, Critical Peace & Conflict Studies, also a member of Washington Foreign Law Society and European Society of International Law.

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