Despite intense efforts, Pakistan remains on FATF grey list

Having understood the American game plan, India acted swiftly to minimise the danger by ensuring that Pakistan did not get off the 'grey list' till its compliance is fully confirmed, writes Brig Anil Gupta (retd) for South Asia Monitor

Brig Anil Gupta (retd) Feb 22, 2020

Despite its intensive lobbying and cosmetic measures to convince the Financial Action Task Force (FATF) to take it off the 'grey list', in which it was placed in June 2018, the United Nations’ anti-terror watchdog did not move Pakistan off the List.

It was not the first time that Pakistan was being named and shamed by clubbing it with countries like Ethiopia, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia and Yemen. It has been similarly placed in 2008 and again from 2012-2015. Pakistan was given an action plan to complete by October 2019, or face being blacklisted, the ultimate death knell for its crippled economy, and to join North Korea and Iran. The FATF’s reasoning is Pakistan’s “structural deficiencies” in anti-money laundering (AML) and combating financing of terrorism (CFT).

However, Pakistan failed to implement the action plan to successfully negotiate its exit from the grey list. It successfully averted the blacklisting with support from China, Malaysia and Turkey and got more time to comply with the plan of action. Entry and exit from FATF’s 'grey list' is an ongoing exercise. Pakistan’s exit or blacklisting will now be decided during its next plenary in June at Paris.

To understand the FATF charter and why Pakistan is on its target list, it is necessary to understand the terms money laundering and terror financing. Money laundering pertains to disguising money earned from a crime as money earned through legitimate sources. The crime could be corruption, drug trafficking, fraud or tax evasion. Terrorist financing involves collection of funds to support acts of terror or terrorist organisations. A key difference between the two is that, in money laundering, the source of funds has to be a crime. In financing of terrorism, funds may come from perfectly legitimate sources, such as donations from ordinary citizens, but the purpose has to be a crime.

Pakistan has been charged with both and is accused of supporting terror groups like the Haqqani Network, Jaish-e- Mohammad, Lashkar-e-Toiba. Hizbul Mujahideen and Taliban. However, Pakistan denies the charge and plays the victim card. It quotes the Global Terrorism Index 2017 by the Institute of Economics and Peace, which describes itself as “an independent, non-partisan, non-profit think tank”, that ranks Pakistan as the fifth-most affected country from terrorism, behind Iraq, Afghanistan, Nigeria and Syria.

Pakistan’s leadership feels that placing it in the grey list is more political than financial. However, Pakistan’s role as a fountainhead of terror has been exposed to the world on numerous occasions. Pakistan today is known to not only produce global terrorists but also harbour, train and finance various jihadi terror organisations, particularly those involved in cross border terror against India and Afghanistan.

Since being placed in the grey list for the third time, Pakistan has seen it as an US attempt to pressurise it to “do more” on issues related to terrorism as US President Donald Trump has openly demanded. Pakistan is also convinced that if the US can place Pakistan on the grey list, it can also help Pakistan to exit the list, if Islamabad can somehow contribute to American interests in the region. While it has made cosmetic attempts to comply with the FATF action plan, it has concentrated more on lobbying and diplomacy to convince Washington and other members it to completely remove it from the list.

Since terrorism is an instrument of Pakistan’s national policy and the real power centre in the country is its Army, which uses cross border terrorism as part of its military strategy, it is near impossible for Pakistan to divorce itself from terrorism. It doubled its lobbying and diplomatic efforts. Imran Khan visited friendly member countries and the USA to garner support. This time it found a needy Trump more amenable than earlier since he needs Pakistan’s assistance in Afghanistan and Iran.

With China and the US on its side, Pakistan took some measures, including arrest and sentencing of Hafiz Saeed and custody of Azhar Masood. It got a shot in the arm when, during its three- day review meeting in Beijing in January 2020, the FATF noted that Pakistan had taken satisfactory steps against terror groups. It satisfactorily evaluated Pakistan’s compliance efforts in relation to money laundering and terror financing. Member countries like US, UK, Japan, Australia and New Zealand did not raise any concern this time. Pakistan’s game plan of successful lobbying at the cost of compliance seemed to be bearing fruit. The logic was simple. It is an election year in the USA. This appears to have shaped America’s stance to go soft on Pakistan during the February plenary. It accordingly convinced its allies and Pakistan began dreaming of being removed from the grey list.

India which knows the ground reality all too well and has suffered Pak-sponsored terrorism, including money laundering and terror financing of the separatist movement in Kashmir, got a rude shock as it was hoping that Pakistan would definitely be blacklisted this time. Having understood the American game plan India acted swiftly to minimise the danger by ensuring that Pakistan did not get off the grey list till its compliance is fully confirmed.

India lobbied to ensure that Pakistan was unable to garner support from 12 member nations needed to remove it from the grey list. It provided dossiers and sufficient evidence to the FATF of Pakistan’s continued involvement in money laundering and terror financing. India was apprehensive that any such decision by the anti-terror body would provide oxygen to terrorist groups like LeT, JeM and HM leading to increase in terrorist activities in J&K and Punjab, where Pakistan is desperately trying to revive militancy.

The FATF week began in Paris on Sunday, February 16, with more than 800 representatives from 250 countries and jurisdictions around the world, the IMF, UN, World Bank and other organisations. The plenary, to be attended by 36 member nations, began on 19 February and culminated on 21 February. Pakistan remained grey-listed and was strictly told to adhere to FATF conditions.

In order to ease pressure on itself from the anti-terror body, Pakistan sentenced Hafiz Saeed for two terror crimes with the sentences to run concurrently. While the US expressed satisfaction, India questioned Pakistan’s intent. India has also raised questions about Azhar Masood and Dawood Ibrahim who still enjoy Pakistani government patronage and roam freely. India’s other concern revolves around fake Indian currency being produced by Pakistan.  Pakistan’s prime interest in infusing fake currency is to promote espionage, destabilise the Indian economy and finance terrorism. That is why India continues to insist on complete compliance of the FATF action plan.

Pakistan failed yet again and will continue on the FATF 'grey list' with its resultant repercussions. India can heave a sigh of relief for the time being as Pakistan is unlikely to openly support and promote cross border terror as long as the sword of FATF continues to hang over its head. India must not only keep its eyes and ears open but simultaneously up the diplomatic offensive against Pakistan to expose it to the international community.  

(The author is a Jammu-based  Indian Army veteran and strategic analyst)