It is most heartening to learn that in a clear, loud and unequivocal message, the Financial Action Task Force (FATF) has sought to send out a blunt message to Pakistan on the issue of curbing terror financing: Either fall in line or be ready to face action. The FATF on June 22 has clearly held out the possibility of placing Pakistan on its “black list”, saying Islamabad had failed for the second consecutive time to implement an action plan to counter terror financing. Pakistan cannot any longer now continue “running with the hare and hunting with the hound”! It has to take decisive action now against all terror related activities that are carried on with impunity from its soil till now!
Before proceeding ahead, it would be instructive to briefly state the background about FATF. The FATF was established in July 1989 by a G-7 summit in Paris to examine and develop measures to combat money laundering. In October 2001, it expanded its mandate to also incorporate efforts to combat terrorist financing as well.
It must be specifically mentioned here that the FATF’s objectives are “to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system”. It would not be out of context to mention here that the FATF monitors the progress of members and non-members in implementing the FATF Recommendations stipulating “a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing as well as the financing of proliferation of weapons of mass destruction”. Also, it identifies jurisdictions with “weak measures to combat money laundering and terrorist financing (AML/CFT) in two FATF public documents that are issued three times a year”.
Interestingly enough, the FATF’s decision-making body , the FATF Plenary, meets three times in Paris between July and June. The FATF’s 38 members (36 member jurisdictions and two regional organizations, the European Commission and Gulf Cooperation Council), two observer jurisdictions (Indonesia and Saudi Arabia), and multiple observer organizations (mainly international banks and law enforcement bodies) attend the Plenary meet. India is a FATF member but Pakistan is not.
It would be pertinent to mention here that the multilateral international watchdog against money laundering and financing of terrorism – the FATF had placed Pakistan on a list of “jurisdictions with strategic deficiencies”, also known as the “grey list” last June that is in June 2018 for failing to counter fund-raising by terror groups such as Lashkar-e-Taiba (LeT) and Jaish-e-Mohammad (JeM). FATF’s reasoning is Pakistan’s “structural deficiencies” in anti-money laundering (AML) and combating financing of terrorism (CFT). Who does not know Pakistan’s leading role in fomenting terrorism in Jammu and Kashmir and other parts of India?
Interestingly enough, this is not the first time that Pakistan has found itself on one of FATF’s list of not-so-good guys. Pakistan was there earlier also in 2008 and then again from 2012 to 2015 for its direct role in fomenting terrorism and promoting various terror groups. The other countries that are on the FATF list, in alphabetical order, are Ethiopia, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia and Yemen.
During an assessment in February, FATF said pointblank that, “Pakistan made ‘limited progress’ in curbing terror financing and failed to show proper understanding of risks posed by banned groups such as Islamic State and al Qaeda.” It must be brought out here that following an assessment at its June 19-21 plenary meeting in Orlando, Florida, FATF expressed “concern that not only did Pakistan fail to complete its action plan items with January deadlines, it also failed to complete its action plan items due May 2019”.
Be it noted, the international watchdog FATF said in a statement issued on June 22 that, “The FATF strongly urges Pakistan to swiftly complete its action plan by October 2019 when the last set of action plan items are set to expire. Otherwise, the FATF will decide the next step at that time for insufficient progress.” It is quite ostensible that though the statement didn’t specifically mention the “black list”, which entails harsher financial sanctions, people familiar with developments said the tacit threat was an indication FATF could downgrade Pakistan from the grey list. Pakistan has every reason to feel most worried on this key issue which directly affects its economy and its reputation on the international forum!
Needless to say, after Pakistan was placed in the grey list, it was asked to implement a 27-point action plan and a 15-month deadline to curb terror financing and money laundering in order to avoid being downgraded to a worse “black list” which could lead to strict sanctions which could impact imports, exports, remittances and access to international lending. It could lose potential loans and foreign investment which it badly needs now as its economy is in dire straits, be shunned by the IMF, the World Bank, the ADB and the EU and also suffer a downgrade by credit rating agencies such as Moody’s, S&P and Fitch which will further harm its economy! Pakistan has to now show that it has taken action in concrete terms and lip service just won’t work in its favour! Following inspections by FATF and Asia Pacific Group (APG) earlier this year, experts had clearly concluded that Pakistan had done a lot to align its domestic laws with international counter-terror obligations but had failed to do enough on the ground to curb fund-raising or freeze assets of eight terror groups, including LeT, JeM, Jamaat-ud-Dawah, Falah-e-Insaniyat Foundation, al Qaeda, Islamic State, Haqqani Network and the Taliban.
Furthermore, at the meeting in Florida, the participants agreed to keep the pressure on Pakistan to act tough against terror groups operating from its soil. It was disclosed by diplomatic sources that contrary to media reports, there was no voting at this meeting. The voting will be part of the October plenary when Pakistan’s fate is decided. For the second time, FATF crtiticised Pakistan for its failure to “demonstrate a proper understanding of Pakistan’s transnational TF (terror financing) risk”.
More significantly, it will be at the October plenary in Paris that Pakistan will need 15 countries to support it to stay out of the grey list. Whether Pakistan will remain in the grey list or is placed in the black list will be pretty clear by October 2019. Pakistan can draw some comfort from the fact that China which is its traditional partner and a close ally will take over the presidency of FATF and it will be in a position to help Islamabad to stay out of the grey list or at least block it from being placed in the black list. In front of global pressure we saw how China had to relent and endorse declaring Masood Azhar as a global terrorist! How things pan out ultimately will be clear only in October!
While making its stand clear on Pakistan, India said that it expects Pakistan to take all necessary steps to effectively implement the FATF action plan fully by September and take credible, verifiable and irreversible measures to address global concerns to terrorism and terrorist financing emanating directly or indirectly from its soil. In response to a media query pertaining to the FATF report, Minister of External Affairs Spokesperson Raveesh Kumar said that the FATF has decided to continue to keep Pakistan on its compliance document (i.e. Grey List) for the International Cooperation Review Group (ICRG) monitoring for its failure to complete the action plan items due in January and May 2019. FATF which is a Paris-based global body is arduously and relentlessly working to curb terrorist financing and money laundering and has asked Pakistan to reassess the operation of banned terrorist outfits in the country.
To put things in perspective, the FATF in a statement issued at the conclusion of its plenary meeting in Orlando, Florida said that Pakistan should also demonstrate that “facilities and services owned or controlled by designated persons are deprived of their resources and the usage of the resources” – a reference to UN-designated terrorists such as LeT founder Hafiz Saeed and JeM chief Masood Azhar allegedly having access to the financial assets of their groups. The watchdog also asked Pakistan to take action to “identify and take enforcement action against illegal money or value transfer services” and to improve “inter-agency coordination including between provincial and federal authorities on combating” terror financing. The statement by FATF also said that, “Law enforcement agencies should identify and investigate the “widest range of TF activity” and investigations and prosecutions should “target designated persons and entities”.”
Not stopping here, FATF also further added that, “Pakistan should also demonstrate effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists.” So far, Pakistan has seized 800 properties belonging to JuD, FIF, JeM and arrested some of their leaders. But it needs to do a lot more and act against other terror groups also operating from its soil like Hizbul Mujahideen etc. FATF had also questioned Pakistan on the funding of these terror groups-run schools. It asked that, “Where is the investigation about the source of funds for these bodies?” Pakistan has itself assessed that it takes $14 million (about Rs 180 crore) a year to run all of them.
It would be worthwhile to mention here that Pakistan has narrowly managed to avoid being placed on the FATF blacklist for now following support from all-weather friend ally China, traditional ally Turkey and Malaysia. It would also be useful to mention here that the FATF charter mandates support of at least three member states to avoid the blacklisting. Pakistan may have got a temporary respite but the black clouds looming on the horizon are still intact as a formal decision of the FATF on blacklisting is to be announced in October 2019.
As things stand, in a statement after the end of the plenary, FATF urged Pakistan to complete its action plan by October 2019 when the last set of ‘action plan’ items is set to expire.” If Pakistan still does not comply by October, FATF will decide the next step at that time for insufficient progress which could refer to a possible blacklisting. The Indian delegation headed by Financial Intelligence Unit chief PK Mishra had pressed for Pakistan’s blacklisting and provided fresh evidence on the role of Hafiz Saeed’s Falah-e-Insaniyat Foundation (FIF) and its deputy Shahid Mahmood in the June 16-21 meet in Orlando, US. Citing investigations into FIF, Delhi vehemently argued that Pakistan based terror groups continue to create unrest in other Indian states too besides Jammu and Kashmir.
It must be reiterated here that Pakistan which has been on the global money laundering and terror financing watchdog FATF’s “grey list” since June 2018 after it was placed in the list of terrorist financing and money laundering risks following a thorough assessment by the Asia Pacific group (APG) of the country’s security mechanism and its financial systems has been under scanner since a long time and cannot run away from its dubious role in fomenting terrorism in India, Afghanistan and other countries! It cannot be lost on us that India which is the co-chair of the joint group of FATF and the Asia Pacific group (APG) along with other global powers, has been pushing vocally for blacklisting of Islamabad as the country has clearly failed to meet international standards in combating financial crimes and terror financing. APG which functions under the FATF is the largest of nine FATF-Style Regional Bodies (FSRBs) whose 41 members include both India and Pakistan. 11 of these members are members of FATF as well. India became a member of the APG in March 1998 and Pakistan in May 2010.
To say the least, Pakistan has not been able to implement the action plan which was assigned to it by the APG and FATF, deadline of which ended in January 2019, but was given breather of sorts till May 2019. FATF has also demanded that Pakistan should work on implementing its 10-point action plan to address its strategic deficiencies. Pakistan must act now decisively against terror groups and terror support emanating from its soil if it wants to escape being blacklisted in October 2019! Pakistan is left with no option now but to either fall in line or be ready to face action. FATF has made this crystal clear to Pakistan. Now the choice is of Pakistan as to what does it want to do!
Time is clearly running out for Pakistan. It has been unable to complete 25 action points. It has one last chance, till its 15-month deadline ends in October, when the FATF plenary will be held! It cannot just escape its responsibility by blaming India for everything! The four countries which originally named Pakistan in the grey list last year – US, UK, Germany and France said that they want “sustained and irreversible” action against its terror infrastructure. Pakistan should now shut down its terror factories operating from its soil and should stop day dreaming that just lobbying with China and other countries like Malaysia will save it from being black listed! It should not forget how China ditched Masood Azhar from being labelled a global terrorist after international pressure mounted even though earlier it kept saving him repeatedly! Pakistan should stop blaming India as it has got accustomed to for everything and act decisively against terror groups and terror support emanating from its soil! If it fails to do so, it will face sanctions. Now it is for Pakistan to decide what it wants to do! The ball is now clearly in Pakistan’s court!
Sanjeev Sirohi, Advocate,
s/o Col BPS Sirohi,
A 82, Defence Enclave,
Sardhana Road, Kankerkhera,
Meerut – 250001, Uttar Pradesh.