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Pakistan under the watchful eye of the FATF

20 October 2020 Expertises   126365  

Roland Jacquard

The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, held a virtual plenary session from October 21 to 23. During this session, the various countries on the FATF watchlist, classified on the organization’s “blacklist” and “gray list”, were reviewed. Currently, two countries, North Korea and Iran, are on the “black list” and 16 countries, including Pakistan, on the “gray list” known as heightened surveillance.

Ahead of this plenary session, the Asia Pacific Group (APG) on Money Laundering, an affiliate of the FATF and a non-political technical body, in its latest follow-up report on Mutual Evaluation of Pakistan in September 2020, dismissed Islamabad’s claims that it had complied or almost complied with all the FATF’s requirements needed to delist Pakistan from the ‘Grey List’. The report concluded that as far as the APG was concerned “Pakistan will remain in enhanced follow up, and will continue to report back to the APG on progress to strengthen the implementation of the Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) measures.”

The APG has a stringent set of monitoring processes while evaluating a country’s compliance to AML/CFT measures. It has a scale of 40 parameters based on which it prepares its evaluation report on any country. These parameters range from presence of effective laws and supervision to prevent terror financing or money laundering to identifying non-profit organisations that act as fronts for terror groups. In Pakistan’s case, the APG, in its Mutual Evaluation Report in October 2019 had found the country compliant on 1, non-compliant on 4, partially compliant on 26 and largely compliant on 9 of these 40 parameters. In the APG’s latest report of September 2020, based on the evaluation conducted after a year, Pakistan’s report card remained more or less unchanged with the country being able to move 1 of its partially compliant parameters to fully compliant.

However, since the APG is a non-political body, its opinion is not binding on the final decision of the FATF. As a result, despite APG’s recent evaluation, the FATF’s Joint Group Progress Report of October 2020 has taken a more lenient stance on Pakistan. As per this group’s assessment, Pakistan has fully complied with 21 of the 27 action points and more or less complied with the remaining 6, thereby indicating that it was more or less on the path of being de-listed. The reasons for this tempered position on Pakistan can only be speculated. The most obvious reason was the Trump administration’s hurry to leave Afghanistan and therefore its dependence on  Pakistan to convince the Taliban for an honorable exit.

Whatever may be the case, important institutions like the FATF should not be allowed to be pressured into taking a decision based on political considerations, especially when the ground situation in Pakistan tells an alarming story.

Europe and more particularly France recently got a peak into the state of affairs in Pakistan when in the beginning of September 2020 hundreds and thousands of Pakistanis came out into the streets in various cities calling for the beheading of ‘French blasphemers’. A few days later, larger crowds, some carrying flags & banners of banned terrorist group Sipah-e-Sahaba Pakistan, took to the streets of Karachi calling Shia Muslims ‘infidels’. What was unmistakably evident and concerning from these street protests was the spread and entrenchment of jihadi sentiments among the Pakistani population. Also, the simple question that came to mind while watching videos of these protests was whether terror or radical Islamic groups would be able to take to the streets in such large numbers and sustain such activities if the Pakistani government was sincere in taking measures to curb their sources of funding.

A closer look at the Pakistan-based social media accounts also conveys a similar tale of UN proscribed Pakistani terrorist groups like the Jaish-e-Muhammad, Lashkar-e-Toiba, Jamaat-ud-Dawa, Harkat-ul-Mujahideen and their leaders being allowed freedom of movement and activity in the country. While these groups openly collect fund in the name of jihad, the Pakistan government tries to convince the FATF that its recently passed Anti-Money Laundering and Anti-Terrorism laws were evidence of its commitment to act against terror groups.

The FATF, therefore, needs to take a hard and objective look at Pakistan’s attempts to leverage its nuisance value, in the larger interest of preserving its credibility as a global financial watchdog and ensure that Islamabad fully complies with terror financing and money laundering obligations before it can be de-listed. In this connection, one is reminded of the case of Iceland that was ‘grey listed’ for lesser infractions and took more than a year to get delisted. With Pakistan’s track record, it would be an irony if Pakistan got away with less due to political compulsions.

* Writer and consultant, president of Roland Jacquard Global Security Consulting (RJGSC).