FATF and the elite

To India’s chagrin, Pakistan has not been blacklisted in the Financial Action Task Force’s (FATF) plenary meeting held in Paris from October 16 to 19, 2019. The decision to retain Pakistan on the grey list was upsetting for the optimists back home, who had expected the new financial team to pull Pakistan out from this pit. Not only has Pakistan been unable to meet the expectations, but its performance was also way too dismal. Of the 27 action points, only four could be accomplished. It was a foretold decision, though. In August the Asian-Pacific Group on Money Laundering had reported the snags preventing Pakistan from crossing over the grey list.

A blacklisted Pakistan would have reinforced India’s recognition of Pakistan as a country that supports terrorism. Indian media and the senior politicians from the BJP had been bombarding the news space with the blacklist projection since August. Therefore, retaining the grey list slot was a better outcome than sliding down to the blacklist. Still, it was disturbing to see the Pakistan government revelling over India’s unfulfilled desire rather than feeling embarrassed about the further squeezing of its space internationally.

When shall we understand that it is just not enough seeing India from eyeball to eyeball on the Line of Control? The economic sphere is the actual field to throw India off-balance and gain the confidence of the international community, as a country with responsible institutions. Of all the anger over India’s forced annexation of Kashmir, we could not sustain even for a day the self-imposed embargo on pharmaceutical trade with India. It so happened because while we had been purportedly fortifying our security, India was pitching the American and European pharmaceutical companies to shift their production facilities to India under the ‘import substitution’ mechanism. By virtue of this geographical change, India became the exporter of more than 50 per cent of our pharmaceutical raw material.

Pakistan has a debt economy that moves in a typical circle. We take money from the debtors, spend a part of that money on buying imports — since we depend largely on the outside world to keep our product basket from getting depleted — use another big chunk to pay the interest on the debt taken previously, and spend the rest on running the government. For the welfare and development projects, we again look up to the international donors. Lately, loans doled under the China-Pakistan Economic Corridor have financed many development projects.

Pakistan received reprimand on four overriding compliance failures. One, the absence of an overarching organisation for consolidated enforcement of the FATF’s policies and procedures, since the provinces and the federal government have been found working in silos. Two, lack of understanding of international standards, as established by the FATF, in the government circles leading to general non-seriousness. Three, the failure to implement domestic laws on anti-money laundering and combating the financing of terrorism. Four, giving amnesty to the business class instead of putting them in jail for tax evasion.

The buck of this failure stops at the Financial Monitoring Unit headed by a hand-picked director-general. He should answer as to how his team has been unable to detect and report the transactions that the FATF radar could discover easily. This incompetency or lack of political will is an outgrowth of the nexus between the political elites and influential bureaucrats.

The case of former State Bank governor Ashraf Wathra explains this riddle. In one of their meetings he was severely snubbed by then finance minister Ishaq Dar on saying that “foreign currency was leaving the country from all international airports... there is need to tighten control on these installations — including checking of all VIPs.”

The panacea for most of Pakistan’s economic woes, including the FATF, lies in appointing competent people who also have the wherewithal to defeat this collusion between the political elites and the bankers.

Published in The Express Tribune, October 23^rd, 2019.

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