While Pakistan narrowly avoided being blacklisted by the Financial Action Task Force (FATF) last week, the threat is still looming. If there is one clear message for Pakistan coming out of the FATF’s plenary session, it is that the country is not even close to getting out of the ‘grey list’.
The FATF’s statement highlighted that “not only did Pakistan fail to complete its action plan items with January deadlines, it also failed to complete its action plan items due May 2019”. It then ‘strongly urged’ Pakistan to swiftly complete its action plan by October or else face the music.
There is no doubt that this crisis originated owing to politics played by India but that also doesn’t mean that our house is in order. The JIT report on the infamous fake accounts case is a testament to what goes on behind the façade of an extensive regulatory and institutional anti-money laundering regime.
Billions of rupees are laundered with impunity right under the nose of the regulators, while hundi and hawala operators continue to function, though with less conspicuity. The terrorism financing threats also keep on haunting an already fragile economy.
The truth of the matter is that while we are quick to undertake legal and regulatory reforms — essentially all paperwork — we remain abysmally weak in operational reforms. We cannot seem to walk the talk, not only in the area of money laundering and terrorism financing but rather across the whole governance spectrum. No wonder Pakistan remains a cemetery for a plethora of modern laws, without having made any difference on ground.
In rare cases, where we do end up taking some action, we somehow don’t do enough. Under immense pressure from FATF, for instance, the government did crack down on proscribed organisations, leading to overtaking their facilities, freezing their accounts and putting people behind bars. But any subsequent legal proceedings remain out of the public eye.
While Pakistan has yet to complete 18 out of 27 actions agreed in the FATF action plan, the major concerns remain slow progress in investigation and prosecution of terrorism financing cases leading to convictions or sanctions, lukewarm clampdown on value transfer services and cash couriers, absence of effective coordination between law enforcement agencies and a regulatory vacuum for a host of high risk businesses.
This time around, China, Turkey and Malaysia came to our rescue, thanks to our intense and last-minute diplomatic efforts. Support from a minimum of three countries, out of 37, is needed to keep on dodging the blacklisting threat. And with Saudi Arabia being granted full membership, we have one more member to work on.
But we must realise that diplomacy alone may keep us out of the black list but cannot get us out of the grey list, for which we would need significantly larger number of votes. And this wouldn’t happen without stepping beyond politics and diplomacy of the issue.
The only viable course of action for Pakistan is, therefore, to wholeheartedly implement the agreed action plan with FATF. This would only be possible with full support of and involvement by the top political, judicial and military brass of the country.
While we are making commissions to inquire into public debt and forming task forces for everything under the sun, maybe its time to divert some serious attention to this very important issue as well. Perhaps the newly-formed high-powered National Development Council, including Army Chief and provincial chief ministers as its members, should take up this issue as a test case and put full might of the state behind it. Or else, the threat of blacklisting will keep on haunting us every few months, shooing away investors and keeping the uncertainty looming.
Published in The Express Tribune, June 25th, 2019.