The game of credits

Will Pakistan exit the FATF grey list? Prospects are high after the international watchdog for financial crimes such as money laundering and terror financing finally acknowledged Pakistan’s progress. But we should be cautious. Pakistan was put on the FATF grey list in June 2018 and was given a 34-point action plan to address deficiencies in curbing money laundering and, more importantly, terror financing.

Pakistani officials have, in private conversations, often expressed reservations that despite Pakistan’s progress, certain FATF members still wanted it to remain on the grey list. The view from the other side, however, has been that contrary to the perception, FATF is a technical process and is not like a mathematics paper that one only needs passing marks. When an action plan is given to a country, it has to be a full compliance.

In order to address the FATF concerns, Pakistan has taken several steps both legal and administrative, but the key sticking point was punishing the individuals and entities involved in terror financing. That’s where the political angel of FATF comes in. The US, India and certain other countries have longstanding concerns over Pakistan allegedly housing militant outfits. They wanted action against such groups particularly after the 9/11 attacks and certain other incidents taking place in India later.

Successive Pakistani governments did take action against individuals and entities. For example, Gen Musharraf banned several jihadi outfits. Similarly, after the November 2008 Mumbai attacks, Hafiz Saeed and his aides were kept under house arrest. But those actions were deemed unsatisfactory by certain powers. Therefore, the US and India, in particular, always sought ‘sustainable and irreversible’ actions against those individuals and entities.

Pakistan, however, kept resisting the pressure until it ran out of options. The 2015 Dawn Leaks controversy gave some sense of what kind of pressures Pakistan was facing and how that unraveled the civil-military relationship. The civilian leadership at that time warned that Pakistan faced an international isolation if actions were not taken against groups once considered the state’s assets. When Pakistan refused to change its approach, that was where those powers decided to raise the cost. It was a well-considered move by the powerful international players to get their objectives achieved through FATF.

When in February 2018, the FATF took a decision to place Pakistan on the grey list, even some of our close friends abandoned us since the other side successfully lobbied and built consensus against us. Through the FATF grey-listing, Pakistan was given a clear message that if actions were not taken against certain individuals and entities, it should be ready for consequences. Remember, non-compliance with the FATF action plan could have led Pakistan to black-listing. At present Iran and North Korea are on the FATF’s blacklist. Given Pakistan’s economic crunch, it would have been devastating for the country to be on the black list. In fact, the grey listing too has cost Pakistan dear. A study by an Islamabad-based think tank, Tabadlab, shows between 2008 and 2018 Pakistan’s GDP lost $38 billion due to FATF grey listing. Raising costs for Pakistan’s decades-old approach has compelled the decision-makers to go after those who were virtually untouched before.

Now the FATF has agreed to send its team to Pakistan that may lead to the country exiting the grey list — only after Hafiz Saeed was sentenced to 33 years over terror financing in April this year. Clearly, there was a link between the FATF decision and Saeed’s conviction. The difficulty for Pakistan certainly does not end here. The FATF team, whenever it undertakes a visit to Pakistan, will make sure Islamabad does not backtrack on these actions. There are many who are competing for taking credits for the FATF decision but we must remember the job is not done by any means!

Published in The Express Tribune, June 20^th, 2022.

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