Paris, 23 February 2018, the second FATF Plenary meeting under the Presidency of Mr. Santiago Otamendi of Argentina took place in Paris 21-23 February 2018 and as an outcome, Pakistan will be placed on the FATF grey-list in June 2018.
Pakistan’s inclusion in the terror financing list issued by the Financial Action Task Force (FATF) has been met with speculations. It is reported that Pakistan did manage to remain out of the list of terror-financing economies initially. China, Saudi Arabia and Turkey supported Pakistan and opposed the bill that aimed to put Pakistan in the grey-list. However, United States pressed on its anti-Pakistan agenda and managed to get an unprecedented re-vote on the bill by lobbying countries against Pakistan.
Media also reported that on the second vote China and Saudi Arabia, both known as Pakistan’s strongest allies, decided to remain silent. Turkey, however, did stand by Pakistan’s side and opposed the bill again. Saudi backed out first followed by Beijing. Turkey’s support didn’t prove enough for Pakistan. FATF announced that Pakistan has been placed on the grey-list of FATF that watches the countries that lack proper efforts to track terrorist financing. Hence the Pakistan will be added to list by June 2018.
So what exactly this Financial Action Task Force Is?
The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions with an objective 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 therefore 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. They form the basis for a co-ordinated response to these threats to the integrity of the financial system and help ensure a level playing field. First issued in 1990, the FATF Recommendations were revised in 1996, 2001, 2003 and most recently in 2012 to ensure that they remain up to date and relevant, and they are intended to be of universal application.
The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally. In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse. The FATF’s decision making body, the FATF Plenary, meets three times per year.
How much will it affect Pakistan for being on FATF grey-list?
It is now worth exploring what this means for Pakistan, particularly its economy, and the potential of this event to cause a shift in the country’s security and Its strategic paradigm.
We have seen that Pakistan was on the FATF grey-list from 2012 to 2015, a period during which it successfully completed an IMF program and raised over $5 billion from the international bond markets. During this period Pakistan’s imports and exports remained stable, evidence that the grey-listing did not raise any significant barriers. However, still some Analysts argue that Pakistan under FATF grey list, this time, may predict a downfall.
Moreover, Pakistan is a classic case of moral hazard: its security establishment is used to taking outsized risks and not suffering the consequences because of protection offered by one or more international patrons, including the United States. What is different this time around is that China and Saudi Arabia, strategic partners that have historically supported Pakistan, have signaled that they will not unconditionally stand by their ally. There is also an ongoing debate in Pakistan around the country’s security and foreign policy and a growing recognition that policies rooted in the pre-9/11 mindset are leading to greater international isolation. The optimists may cautiously hope that a nudge by the Chinese coupled with a growing domestic debate may finally lead to a shift in Pakistan’s strategic posture. However, my argument would be, that even a cautiously optimistic assessment is too optimistic this time.
While Pakistan may have received a three-month reprieve before the practical implications of the decision kick in, what remains to be seen is whether the government in Pakistan will take any significant steps to ensure that the country doesn’t remain on the list for a longer period, which would certainly hurt Pakistan’s struggling economy. Arguably, the three months of acquittal that Pakistan has received offers the country a window of opportunity in terms of taking serious steps to show the international community, including its close ally, China, that the country is serious in combating all sorts of terrorism.
The decision to place Islamabad on the list of countries financing terrorism is an opportunity for Pakistan’s civil and military leadership to bridge their own differences when it comes to forming a counterterrorism policy with consensus and taking on board all stakeholders in the country. Currently, Pakistan’s counterterrorism policy is being guided by the country’s powerful military establishment with the elected civilian government virtually left sitting on the sidelines. The civilian government and military leadership in Pakistan need to realize that the current counterterrorism policy is likely to have huge implications for Pakistan if the country doesn’t make any changes to its security policy.
Lastly, I believe that Pakistan needs to come up with a unified and more National Interest, consensus based Foreign Policy alongside a powerful use of Diplomacy and lobbying tools to avoid such embarrassments or isolation internationally. We are a country of over 200 million people but with no prominent presence in Lobbying or Think Tanks here within European Union. A much effort is needed to counter such International Isolationism or embarrassment.
‘Overseas Tribune’ Diplomatic Correspondent