If the Financial Action Task Force (FATF) is described as a nemesis for Pakistan in financial terms and also otherwise, it would hardly be an overstatement because Pakistan has been consigned to the grey list and that has incurred massive losses to its GDP to the tune of $38 billion.

It has been suggested that the FATF’s decision to keep the country on its grey list may have been influenced by its failure to do enough towards the promotion of US strategic interests in the region. However, government leaders in Pakistan can hardly deny that money laundering has been a problem the state has struggled with. They have been consistently accusing rival leaders of this and even currently are trying to prosecute quite a few on the charge.

Pakistan was put on the grey list under President Asif Ali Zardari in 2012. The apparent reason then was the US dissatisfaction with Pakistan’s compliance with the UN Security Council Resolution 1267, which asked Pakistan to clamp a travel ban, an asset freeze, and an arms embargo on all militant groups affiliated with Al Qaeda.

The Resolution 1267 was passed unanimously in October 1999. It designated Osama Bin Laden and his associates as terrorists. That resolution and its various incarnations incriminated and rebuked the Taliban regime in Afghanistan and exhorted the states under its influence to comply with these resolutions - shutting down terrorist sanctuaries and training camps on their soil.

The states were also made responsible to ensure that their territory was not used for terrorist training camps and installations. It required all member states to freeze assets and financial resources in any way linked to the Taliban. It also urged the member states to cooperate for effective measures against Osama Bin Laden and his associates.

The US found Pakistan wanting in compliance of its bidding. Therefore, it was kept on the grey list from 2012 to 2015. The reason for including Pakistan in the list was provided by the FATF itself in its public statements explaining its jurisdiction over strategic anti-money laundering and counter terrorism financing strategies. It said Pakistan had not done enough in countering the deficiencies found in deterrence.

According to FATF observers, Pakistan had developed no action plan throughout 2012-2015. It appeared that the Pakistani government was not serious in implementing the FATF recommendations. Pakistan was again put on the grey list in 2018, on account of the lack of “strategic deficiencies” in curbing corruption, tax evasion and terrorism finance.

The other day, in a TV debate, the then finance minister (in a caretaker capacity) accepted responsibility for letting Pakistan to be added to the list. No explanation has come forward from the people at the helm from 2013 to 2018.

Pakistan needs to tread very carefully and cultivate its image as a responsible state. The FATF keeps on adding to its recommendations that it asked Pakistan to fulfill. That calls for vigilance at the diplomatic front.

The FATF, also known by its French name, Groupe d’action financière (GAFI), is an intergovernmental organisation conjured up into existence at the behest of the G7 to develop policies to combat money laundering. In 2001 after 9/11, its mandate was expanded to include terrorism financing. Its objectives are “to set standards and promote effective implementation of legal, regulatory, and operational measures for combatting money laundering, terrorist financing and other related threats to the integrity of the international financial system.”

The FATF is a “policy-making body” that works to generate the necessary political will to bring about national legislative and regulatory reforms to check such trends. It monitors progress in implementing its recommendations through peer reviews (mutual evaluations) of member countries. It was founded in 1989 with its headquarters at Paris to combat the growing menace of money laundering.

The task force was charged with studying money laundering trends, monitoring legislative, financial and law enforcement activities taken at the national and international level, reporting on compliance, and issuing recommendations and standards to combat money laundering. At the time of its formation, it had 16 members. By 2021 the number has grown to 39.

One must not consider it a neutral body. Like the IMF and the World Bank, the FATF has been instrumental in peddling political and strategic interests of the states that fund it.

One of the reasons to put Pakistan on the grey list is to exert pressure on Pakistan to force it to act against the groups US has declared terrorist. Prime Minister Imran Khan holds the view that collateral damage in actions against terrorists is often the prime cause for radicalisation of the people. The US is not amenable to this line of argument.

The prime minister’s famous “absolutely not” on providing military bases to the US in the context of a scheduled FATF review may not have been sagacious. The US is not only the largest financer of the FATF, the president of the task force is also from the US Treasury department which also holds the office of Terrorist Financing and Financial Crimes.

All said, Pakistan needs to tread very carefully and cultivate its image as a responsible state. The FATF has been adding to its recommendations for Pakistan. There is need for extreme vigilance on the diplomatic front. I have argued somewhere that Pakistan is gradually redefining itself as a nation state and trying to shed its self-image of an ideological state. That process must be hastened at the academic and intellectual level. Also, its plural character should be celebrated.

The writer is a professional historian and an author.   He can be reached at tk393@cam.ac.uk