FATF and Pakistan

Published: August 25, 2019

Pakistan once again survived the harsh action of being ‘blacklisted’ for its estimated shortcomings to address the issues of money laundering and terror-financing. The Asia Pacific Group (APG), a regional affiliate of the Financial Action Task Force (FATF), in its meeting on Wednesday in Canberra, Australia, adopted Pakistan’s Mutual Evaluation Report (MER) for the period from February to October 2018 and relating to adoption of regimes and mechanism taken to check, contain, eliminate the menace of money laundering that is being considered the world over in sustaining terrorists networks and fuelling their activities.

It was Pakistan’s third mutual evaluation during the past ten years. The APG also considered and adopted evaluation reports in respect of five other countries — China, Chinese Taipei, Hong Kong, the Philippines and the Solomon Islands. As the APG estimated that the evaluation report indicated that further actions were still needed by Islamabad to strengthen its acts and deeds regarding money-laundering and terror-financing, Pakistan — already in the ‘grey list’ since June 2018 — was placed in the Enhanced Expedited Follow-Up List.

We live in an era where propaganda wars carry utmost value and where perceptions have to be manufactured to overshadow facts. Given the ongoing tensions between two South Asian neighbours, India’s private and public media immediately availed the opportunity, unleashing a torrent of misleading information claiming that that the APG had placed Pakistan on the ‘black list’. The Indian media reports were soon picked up by other media outlets outside India. Not only Pakistan’s finance ministry rejected these reports as ‘incorrect and baseless’, FATF spokesperson Alexandra Wijmenga too clarified that only the FATF had the authority to blacklist a country, and not its regional affiliate i.e. APG. She added that “at a meeting in October, FATF will examine Pakistan’s progress on its existing action plan and consider the next step.” India had since long been manoeuvring to get Pakistan blacklisted by the FATF. However, its earlier attempts, though backed by the US, were foiled as Islamabad managed to gather support of Turkey, Malaysia and China.

However, so long as Pakistan is on the ‘grey list’, it will continue to suffer on several counts, especially in the economic, trade, finance and defence sectors. Officials in Islamabad claim that ‘substantial progress’ has been made to implement the FATF action plan in letter and spirit. In fact, this gigantic task requires an overall review and modification of laws and rules to check money laundering and terror financing. The whole exercise needs to be completed and implemented before a final review of Pakistan’s case in October. The ambit of these laws includes exchange control mechanisms, banking and non-banking channels, financial and insurance services, corporate and non-corporate sectors, etc. According to some reports, changes in these laws have though been vetted by the respective parliamentary committees, their approval by the two houses of parliament would not be an easy task and it may turn out to be a real test for the incumbent PTI government as many political leaders have now been facing cases on money-laundering charges. Officials claim had there not been convincing progress on the FATF action plan, Pakistan would never have succeeded in working out a deal with the International Monetary Fund.

That said and done, further progress with regard to implementation on the FATF action plan will be reviewed during a meeting in Bangkok on September 5. Another meeting in Paris from October 18 to 23 will finally determine if Islamabad had successfully delivered and implemented the commitments it had made to the FATF. And if it is able to convince the FATF of its measures and action, only then it will qualify to get out of the ‘grey list’. However, this time around, the situation may be different. India would still try to get Pakistan blacklisted, but the US would prefer to pull Pakistan out as the latter’s support is so essential for the former to reach Afghanistan peace settlement.

Published in The Express Tribune, August 25th, 2019.

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