The Financial Action Task Force (FATF) has decided to place Pakistan back on its watch list, or “grey list”, from June subjecting it to direct monitoring and intense scrutiny by the International Co-operation Review Group (ICRG) on terror financing
‘Grey list’ comprises nations that are not doing enough to combat terrorism financing.
What is FATF?
The Financial Action Task Force (FATF) is an inter government body established in 1989.
The objectives of the FATF:
- 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.
The FATF is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
The FATF has developed a series of Recommendations that are recognised as the international standard for combating of money laundering and the financing of terrorism and proliferation of weapons of mass destruction.
The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing counter-measures.
It promotes the adoption and implementation of appropriate measures globally.
Why did FATF decide to place Pakistan on its watch list?
Pakistan had been on the same list from 2012 to 2015.
The decision is overdue, given Pakistan’s blatant violation of its obligations to crack down on groups banned by the Security Council 1267 sanctions committee that monitors groups affiliated to the Taliban such as the Lashkar-e-Taiba, Jaish-e-Mohammed and the Haqqani network.
Their leaders like Hafiz Saeed and Masood Azhar continue to hold public rallies and freely garner support and donations.
Both the LeT and JeM, continue to praise and claim credit for terror attacks in India.They have grown their bases in Pakistan, with fortress-like headquarters in Muridke and Bahawalpur that the authorities turn a blind eye to.
By doing this, successive Pakistani governments shown disregard for the outcry against terrorism worldwide.
One violation was a Pakistani court’s bail to Zaki-ur-Rehman Lakhvi, LeT operational commander and a key planner of the November 2008 Mumbai terror attacks.
Under the 1267 sanctions ruling, banned entities can get no funds, yet Lakhvi received the bail amount, and the authorities have since lost track of him.
What is UNSC resolution 1267?
UNSC resolution 1267 was adopted in 1999.
Under this, the UNSC designated Osama bin Laden and associates as terrorists. It also established a sanctions regime to cover individuals and entities associated with Al-Qaida, Osama bin Laden and Taliban wherever located.
Since US invasion of Afghanistan in 2001, the sanctions have been applied to individuals and organizations in all parts of the world.
Who supported this resolution against Pakistan?
The resolution against Pakistan was moved by the US because Islamabad is not doing enough to comply with anti-terrorist financing and anti-money laundering regulations.
The initial push came from the US, UK, France and Germany to get Pakistan placed on the Financial Action Task Force’s “grey” list.
Earlier, the Saudi Arabia-led GCC and Turkey had objected to the listing. Western powers, including the US, France and UK, worked on the GCC to also join the consensus.
China also removed its earlier objections to the move.
What are the implications for Pakistan now?
Once placed in the “grey list”, countries face risk of downgrade by multilateral lenders like IMF, World Bank, ADB etc. And further reduction in their risk-rating by agencies.
It may impede Pakistan’s access to global markets to attract foreign investments at a time when its foreign reserves are dwindling and external deficits are widening.
Some kind of pressure is increased up with financial censures on its banks and businesses and targeted sanctions imposed against specific law enforcement and intelligence officials.
If Islamabad will not comply with the obligations then the country runs the risk of being included on to the blacklist of the FATF that currently features Iran and North Korea.
As a reaction to this move, authorities in Pakistan recently confiscated all properties of the Jamaat-ud-Dawa (JuD) and its charity arm, the Falah-e-Insaniat Foundation (FIF).
The hope is that such sanctions will persuade Pakistan to stop state support for these terror groups and become a responsible player on the global stage and a responsive neighbour.