At its latest meeting, the Financial Action Task Force (FATF) decided to keep Pakistan on its grey list. Several government leaders in Islamabad had said they expected a better outcome this time.

The financial watchdog said Pakistan had made significant progress by implementing 26 out of the 27 points under a proposed action plan. The FATF said that it will keep Islamabad on its “increased monitoring list” till the country addressed the remaining item on the original action plan as well as all items on the action plan against money laundering handed out by the watchdog’s regional partner – the Asia Pacific Group (APG) – in 2019.

The G-7 Summit in Paris in 1989 had established the FATF to deal with money laundering. The task force was given the responsibility of examining money laundering techniques and trends, reviewing the action taken at national or international level and setting out the measures needed to be taken to combat money laundering.

In 2001, development of standards in the fight against terrorist financing was added to the mission of the FATF. In October 2001 the FATF issued the eight special recommendations to deal with the issue of terrorist financing. So far, the FATF has evolved 40 recommendations and nine special recommendations on terrorist financing. These have been integrated with the measures against money laundering taken by the member countries. The inter-governmental organisation has 39 formal members now. Pakistan is not a member state. It is an associate member of the Asia Pacific Group (APG) on money laundering and works with the APG to implement United Nations Security Council Resolution 1267. Pakistan joined the FATF APG in May 2000.

Earlier, Pakistan was on the FATF grey list from 2012 to 2015, when it completed an IMF programme and raised funds from international bond markets. However, it failed to comply with the given action plan after it was removed from the grey list. It was again added to the grey list in June 2018 and asked to fully comply with 31 out of 40 FATF recommendations under a mutual evaluation report (MER) technical compliance.

Under its regular MER every five years, the FATF reviews the progress/ performance of every member country and gives an action plan to meet the deficiencies. Pakistan’s case appears unique because the FATF started its five-year regular mutual evaluation report in 2019 while it was trying to fulfill the remaining 27 recommendations out of the 31 it had failed to comply with following the 2015 review for which it was again put on the grey list in 2018.

It is unusual for the FATF to simultaneously ask a country to implement an action plan and hold a regular MER under which the FATF pointed out nearly 100 deficiencies in the system to curb money laundering. The fulfillment of the 27-point action plan was being reviewed in regular quarterly meetings. In the last meeting, the FATF acknowledged that Pakistan had complied with 26 recommendations under that action plan.

In addition to the 27-point action plan, the FATF APG has introduced six more action items. The FATF president said all items on both action plans needed to be addressed and goals fulfilled for Pakistan to exit the grey list. He said even after the last remaining item on the original action plan was addressed, delisting would not occur as a separate assessment will be held for the parallel action plan.

“Pakistan has made significant progress and it has largely addressed 26 out of the 27 items on the action plan it first committed to in June 2018,” Dr Marcus Pleyer, the FATF president, stated at the meeting on June 25. “However, Islamabad still needs to address the matters of investigation and prosecution of senior leaders and commanders of UN-designated terror groups under the given task to control terrorism financing. Pakistan has still failed to effectively implement the global FATF standards across a number of areas.”

“The FATF has worked with Pakistan to work on areas that need to be improved as part of the new action plan that largely focuses on money laundering risks including increasing the number of investigations and prosecutions and making sure that law enforcement agencies cooperate internationally to trace, freeze and confiscate assets. This is about helping authorities stop corruption and prevent organised criminals from profiting from their crimes and undermining the financial system and legitimate economy in Pakistan,” Pleyer said.

In addition to the 27-point action plan, the FATF APG has introduced six action items for some countries under the APG evaluation. These items include enhancing international cooperation and demonstrating that assistance is being sought from foreign countries in implementing UN Security Council designations. The FATF president said all items on both action plans needed to be addressed and goals fulfilled for Pakistan to exit the grey list. He said even after the last remaining item on the original action plan was addressed, a delisting would not occur as there was also the other action plan for which a separate assessment will be held. “Pakistan will not be delisted from the grey list before both action plans are completed and two onsite [assessments] have been granted and successfully completed and have shown that the improvements are sustainable before the FATF members decide on delisting,” Pleyer stated.

A day before the FATF meeting, Foreign Minister Shah Mahmood Qureshi had seemed upbeat about Pakistan’s chances of making it off the grey list.

Soon after the FATF decision to keep Islamabad on the grey list he said: “If it were a technical decision, then the country would have been added to the white list. The world will have to decide now if it is a technical or a politically motivated forum. It seems that some forces want to keep the sword of FATF hanging over Pakistan,” he said. He also said that India was trying to use the FATF for political purposes against Islamabad. He said Pakistan would continue to work to prevent money laundering and terrorist financing in its own interest. Earlier, in a statement, he accused India of making attempts to “misuse the FATF forum for political purposes and doing propaganda against Pakistan.” He added that Pakistan had fulfilled 26 out of 27 recommendations of the FATF Action Plan and that therefore, there was no justification for the country to remain on the grey list.

However, the FATF rejected the allegation of political motivation or discrimination, saying: “All countries are treated equal.”

Government leaders in Islamabad see this situation in the context of US-Pakistan relations that are at a new crossroads given the exit of American and NATO forces from Kabul and Islamabad’s refusal to military bases for US to carry out attacks in Afghanistan. Some say the India-America alliance wants to control the geo-politics in the region. They say the watchdog’s actions now appear to be more political than technical in nature.

The recent FATF meeting in Paris coincided with a deadly blast in Lahore near the residence of Hafiz Muhammad Saeed, convicted on a terror-financing charge in December 2020. It has been suggested that the blast was an effort by Pakistan’s enemies to influence the outcome of the FATF meeting.

Talking to the media after the FATF decision, Federal Minister for Energy Hammad Azhar said that India would be a “test case” for the watchdog. An assessment of India’s performance for Anti-Money Laundering/ Combatting the Financing of Terrorism (AML/CFT) is due in the near future. He also said that Pakistan would fully implement the FATF action plan and get off the grey list.

“No doubt there is a political dimension to keeping Islamabad on the grey list. It is linked to the geo-political situation. India and America are key players in the region along with Pakistan,” says Mehtab Haider, a journalist who has been following the FATF proceedings for several years. “At the moment, it seems more a political than a technical issue. Ultimately, this will help Pakistan keep its house in order and document its economy in a very transparent way.”

The author is a staff reporter. He can be reached at vaqargillani@gmail.com