The FATF sword is dangling over Pakistan. With the country on the verge of economic bankruptcy, it desperately needs access to international financial markets.
The greylisting of Pakistan by the Financial Action Task Force (FATF) last week was already a done deal. It had been decided back in February, and only the formal listing had been pushed ahead to June. For Pakistan, the issue wasn’t that it would be on the FATF greylist, but that if the action plan prepared by Pakistan to meet its obligations on anti-money laundering and countering the financing of terrorism (AML/CFT) was not approved, it could end up in the company of Iran and North Korea on the blacklist and be virtually cut off from the international financial system.
A few half-baked proposals that the Pakistanis made after February didn’t impress anyone in FATF which seemed to have seen through the games that Pakistanis are so adept at playing. It soon became clear that if Pakistan wanted to avoid being blacklisted, mere assurances and some eyewash action against the terror finance industry flourishing in that country wouldn’t suffice. Nor for that matter would legislation and policy announcements aimed at plugging the deficiencies in the AML/CFT framework be enough to convince FATF of Pakistan’s bonafides. Pakistan was therefore left with no choice but to agree to a timeline for implementing in a demonstrable manner the steps being demanded by the FATF.
For now, Pakistan has got off the hook of blacklisting by making a “high-level political commitment to work with the FATF and APG (Asia/Pacific Group on Money Laundering) to strengthen its AML/CFT regime and to address its strategic counter-terrorist financing-related deficiencies.” Yet, over the next 15 months, unless Pakistan makes “sufficient and timely progress,” the FATF can move it to what it calls the “public statement” which includes countries against which FATF calls upon members and non-members to apply either “counter-measures” or “enhanced due diligence measures proportionate to the risks arising from the deficiencies associated with the country.” In other words, if Pakistan doesn’t deliver, it could be consigned to the “blacklist.” According to a Pakistani official who attended the FATF meeting: “we have to implement the tough plan in a limited time period and if we convince FATF members, Islamabad could get waiver in
Among the actions Pakistan is committed to undertake, are: “demonstrating that law enforcement agencies (LEAs) are identifying and investigating the widest range of Terror Financing activity and that TF investigations and prosecutions target designated persons and entities, and persons and entities acting on behalf or at the direction of the designated persons or entities; demonstrating that TF prosecutions result in effective, proportionate and dissuasive sanctions and enhancing the capacity and support for prosecutors and the judiciary; and demonstrating effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services.”
Break down the jargon and it basically means cracking down even on the funds that terror groups collect from madrassas, mosques and markets or through sale of animal hides given to them after Eid. It also means there will be no more eyewash prosecutions in which the judicial process is used to shield and protect terror financiers and money launderers.
According to the Pakistani media, a 26 point action plan given by Pakistan requires it to “proactively cooperate with counterpart bilateral agencies to choke financing to Da’ish, Al Qaeda, Jamaatud Dawa and its affiliate FIF, LeT, JeM, the Haqqani Network and persons affiliated with the Taliban.” Not only is Pakistan to investigate and prosecute these terror groups and people associated with them, it must also secure their convictions. There is more. Pakistan now will have to “demonstrate that it was applying administrative sanctions against all UN terrorist groups” and is required to “deprive the UN-listed entities, operating charities and network of social services of funds and resources.”
This means that the charade of the Lashkar-e-Taiba chief, Hafiz Saeed behaving as the Mother Teresa of Pakistan and trying to pass off the Falah-i-Insaniyat Foundation as a charity organisation will not work anymore. Nor will the mere designation of proscribed “charities” like Al Akhtar and Al Rashid trusts which have continued to operate albeit under new names — Azmat-e-Pakistan Foundation and Al Amin Trust respectively — be permitted, because Pakistan will now onwards have to ensure that “criminals are not able to hide their identity through use of complex ownership structure of companies, partnerships, trusts or other similar forms.”
At least, in theory, it would appear that the FATF action plan will force Pakistan to clean up its act. But Pakistan's capacity for deviousness and deceit should never be underestimated, especially when it comes to the issue of jihadist terror groups who function as its sword arm. On the day Pakistan was officially being put on the greylist and had made onerous commitments to crackdown on the booming terror finance industry operating in the country, the caretaker government removed the fanatical Sunni terror organisation Ahle Sunnat wal Jamaat (ASWJ), formerly known as Sipah-e-Sahaba Pakistan and responsible for the murder of thousands of Shias, from the list of banned organisations. Despite being muzzled by the military, the Pakistani media did make some noises over the incongruity of Pakistan promising FATF tough action against terror groups and removing ASWJ from the ban list. While the ASWJ hasn’t been listed as an international terror group by the United Nations, and as such lifting the ban on it doesn’t technically violate the commitments Pakistan made at FATF, it shows both the intent as well as the policy of the Pakistani state.
In fact, even as Pakistan was drawing up its 26 point action plan for FATF, it was merrily violating the same by turning a blind eye to the participation of the UN-proscribed LeT/JuD’s political wing, the Milli Muslim League (often referred to as the Military Muslim League by wags) in the forthcoming general elections. In case of the MML, the Pakistanis resorted to the typical manipulations for which they are so infamous. To demonstrate their bonafides to the rest of world, they made a show of acting against a UN-proscribed organisation by not allowing the MML to get registered by the Election Commission of Pakistan. But in a sleight of hand, they allowed the terror group to do what corporate houses often do to hide or shield their operations — use shell companies. In the case of the MML, since it couldn’t do politics under its own brand name, it has resorted to ambush politics by taking over a shell political party — Allah-o-Akbar Tehrik (AAT) — and carrying out its political activities under the banner of this party which is registered with the ECP and can therefore be allotted a symbol which all candidates holding the party ticket can use.
The messaging couldn’t be clearer: Jihad Inc. is alive and well. As far as the Pakistani “deep state” is concerned, the rest of the world can go take a hike if it thinks that it can force Pakistan to act against or limit the activity of the MML. It is precisely the sort of defiance that Pakistan displayed over its relationship with the Taliban. On the face of it, the Pakistanis tried to show that they had severed their links with the Taliban, but behind the scenes, they did everything and anything to protect the Taliban, train them, fund them, equip them and give them safe haven. Of course, if the FATF action plan has to have any effect, then the time to crack the whip is now. Using the commitments Pakistan has undertaken to curb terror finance, Pakistan needs to be asked about the source of funds of the candidates fighting on Allah-o-Akbar Tehrik tickets. Every single rupee used by the AAT makes Pakistan fall foul of the FATF action plan.
Clearly, the FATF sword is now dangling over Pakistan’s head. With the country on the verge of economic bankruptcy, it desperately needs access to international financial markets. What is more, it cannot depend on its new patron, China to pull it out of the hole in which it finds itself because China won’t jeopardise its own relations with powerful countries like the United States of America, Germany, France and the United Kingdom, not to mention India for the sake of allowing Pakistan to continue with its addiction to jihadist terrorists whom even the Chinese find a threat. Despite this, the question remains: will Pakistan deliver? And if it doesn’t, will Pakistan be guillotined from the international financial system? The answer to this will depend critically on whether or not Pakistan delivers on what the Great Powers consider to be in their strategic interest.
The bottom line is that if Pakistan delivers on Afghanistan and some other strategic matters, then even if it is unable to fulfil all its commitments, or plays truant on some of its commitments on groups like Lashkar-e-Taiba/Jamaatud Dawa and Jaish-e-Mohammad, it will get a reprieve and more time. Yet, if Pakistan cannot deliver on Taliban and Haqqani network (groups that directly affect US and Western interests), then even if it follows the FATF timeline sincerely and to the letter, the sword could still drop. The fact that over the years, the Pakistanis have successfully managed to play the fiddle and compartmentalise their jihadist activity according to the expediency of the situation and their own strategic calculus, means that India shouldn’t be sanguine about the FATF forcing Pakistan to clean up its act.
This commentary originally appeared in Newslaundry.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Sushant Sareen is Senior Fellow at Observer Research Foundation. His published works include: Balochistan: Forgotten War, Forsaken People (Monograph, 2017) Corridor Calculus: China-Pakistan Economic Corridor & China’s comprador ...
Read More +
PREV
