The Financial Action Task Force’s (FATF) decision to keep Pakistan on its grey list till June 2021 has washed away the government’s claims of having done enough to get off the “grey list” easily. The FATF has strongly urged Pakistan to move swiftly to complete its action plan before June 2021.

Since June 2018, Pakistan has faced the challenging task of clearing its name. Steps taken in this regard so far include introducing new laws, amending some existing ones and taking serious action against some proscribed organisations and their leaders.

Prime Minister Imran Khan, however, has said the decision of the FATF plenary not to include Pakistan in its blacklist is a victory. In an interview to a TV channel, the prime minister stated that, “India has failed to get Pakistan placed on the FATF ‘blacklist’.”

However, some security analysts say that the recent acquittal of Omar Sheikh, the prime accused in the 2002 beheading of American journalist Daniel Pearl, by the Supreme Court of Pakistan and poor diplomatic relations with France and the European Union have made Islamabad’s position weaker.

In the past, Pakistan has been twice placed on the “grey list” over terror-financing (TF) allegations. It was first placed on the list in 2008 but removed in 2009; the second time around, it was placed on the list in 2012 and removed in 2015.

The FATF grey list comprises countries that are considered safe havens for those supporting terrorism and money laundering. The inclusion serves as a warning to the country before it is blacklisted if corrective measures are not taken.

Since June 2018, Pakistan has made a high-level political commitment to work with the FATF and APG (Asia Pacific Group) to strengthen its AML/CFT (Anti-Money Laundering/Combating the Terror-Financing) regime and to address its strategic counter-terrorist financing-related deficiencies. In its recent plenary, the FATF has stated that Pakistan’s continued political commitment has led to significant progress across a comprehensive CFT action plan, by demonstrating that law enforcement agencies are identifying and investigating the widest range of TF activity, demonstrating enforcement against TFS violations, and working to prevent the raising and circulation of funds by imposing stricter controls on facilities and services owned or controlled by flagged persons and entities.

Since 2018, Pakistan has done a lot to get off the FATF grey list yet there are some deficiencies in its mechanisms that have to be overcome more effectively, says Salman Abid.

However, the FATF statement also says that “Pakistan should continue to work on implementing the three remaining items in its action plan to address its strategically important deficiencies, namely by: (1) demonstrating that TF investigations and prosecutions target persons and entities acting on behalf or at the direction of the designated persons or entities; (2) demonstrating that TF prosecutions result in effective, proportionate and dissuasive sanctions; and (3) demonstrating effective implementation of targeted financial sanctions against all designated terrorists, specifically those acting for or on their behalf.”

“As all action plan deadlines have expired, the FATF strongly urges Pakistan to swiftly complete its full action plan before June 2021”, the statement adds.

Since 2018, Pakistan has done a lot to get off the FATF grey list. Yet there are some deficiencies in its legal regime that should be overcome more effectively, political analyst Salman Abid tells The News on Sunday (TNS). The task given by the FATF is really challenging for Pakistan, according to Abid.

“Remaining on the grey list has caused a lot of challenges in getting any respite in accessing finances in the forms of aid and investment from international bodies. The latest decision by the FATF will extend its problems considering the country’s serious economic crises”, he adds.

A research paper, titled Bearing the Cost of Global Politics, published by the Islamabad-based think-tank TABADLAB in February 2021 investigates the economic implications of Pakistan’s placement on the FATF grey list. According to the paper, “the synthetic control method is used to understand how Pakistan’s economy would have evolved in the absence of FATF interventions. Results suggest that FATF grey-listing, since 2008, may have resulted in a cumulative real GDP loss of approximately $38 billion”. The losses have been identified on the basis of a decrease in foreign direct investment, consumption expenditures and exports.

Pakistan’s inclusion in the grey list can be attributed to the fact that some laws in the country are still to be altered to meet the FATF standards and in accordance with the latest UN resolution (2462) which seeks to criminalise terrorist financing, Abid says. However, “this is perhaps the last chance to address all remaining action plan items by the due date,” adds Abid.

The Paris-based FATF is an inter-governmental organisation that has 37 nations, including India, and two regional organisations as members. France is one of its most important members and exercises huge influence over the decisions made by the organisation.

The country has voted against Pakistan in all previous plenaries, due perhaps also to cold bilateral ties between the two countries for the last year or so. President Emmanuel Macron’s comments on Islam following a teacher’s beheading had incurred severe criticism from Pakistani leaders. Pakistan has also not had an ambassador in France for eight months. Meanwhile, economic and defence deals concluded between France and India have made for more resilient bilateral ties between the two.

Some analysts say that better diplomatic approaches, and a fully functional embassy in Paris could have brought good results. India, they say, is always looking for opportunities to create more economic and political problems for Pakistan.

However, Muhammad Aqil Naeem, a former ambassador, says that India’s energies are not focused solely on the Foreign Office or the embassies working in the European region.

“Adversaries are always in the process of lobbying against one another but Pakistan, to counter Indian lobby in the FATF case, could have been more convincing to the world by taking effective steps against elements involved in money laundering and terror-financing”, says Naeem.

He says such matters cannot be resolved solely at the level of the ambassador because embassies or ambassadors have to work with the narrative adopted by the state.

“An aggressive diplomatic approach is connected to a state’s internal economic, political and security strategies. No different outcome could be expected even if Pakistan had appointed an ambassador for France. Pakistan has to remove all hiccups identified by the FATF”, he adds.

The author is a staff    member. He can be reached at warraichshehryar@gmail.com