Pakistan FATF
On June 21, 2019, FATF in a release , however, stated that “the FATF expresses concern that not only did Pakistan fail to complete its action plan items with January [2019"> deadlines, it also failed to complete its action plan items due May 2019”. The release went on to add that “the FATF strongly urges Pakistan to swiftly complete its action plan by October 2019 when the last set of action plan items are set to expire” and lastly warned, “otherwise, the FATF will decide the next step at that time for insufficient progress”.
On June 27, 2018, FATF had decided to place Pakistan, along with seven other countries, on its ‘grey list’. In a release dated June 29, 2018, FATF stated, “as part of its ongoing review of compliance with the AML/CFT standards, the FATF identifies the following jurisdictions [eight countries"> that have strategic AML/CFT deficiencies…” It had given Pakistan a 27-point action plan at this stage.
Pakistan had then made a high-level political commitment to work with FATF and the Asia Pacific Group (APG) to strengthen its Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime and to address its strategic counter-terrorist financing-related deficiencies. Pakistan promised that it would work to implement the FATF action in 10 steps, which included:
• adequately demonstrating its proper understanding of the TF [Terrorist Financing"> risks posed by the terrorist groups identified by FATF [Da’esh, AQ, JuD, FiF, LeT, JeM, HQN, and persons affiliated with the Taliban">, and conducting supervision on a risk-sensitive basis.
• demonstrating that authorities are identifying cash couriers and enforcing controls on illicit movement of currency and understanding the risk of cash couriers being used for TF.
• demonstrating that law enforcement agencies (LEAs) are identifying and investigating the widest range of TF activity and that TF investigations and prosecutions target designated persons and entities.
• demonstrating that facilities and services owned or controlled by designated person are deprived of their resources and the usage of the resources.
Pakistan had asked for a 15-month time period, to implement all these changes, which finishes in September 2019, so any hope of FATF successfully putting it in the blacklist before September 2019 was unreasonable. It is notable, however, that some media reports claimed that the FATF has given an all clear to Pakistan on only two of 27 action plans it was supposed to complete to get out of the ‘grey list’.
The FATF, as in June 2019, had made a similar assessment in February 2019 as well. On February 22, 2019, an FATF release had stated that “given the limited progress on action plan items due in January 2019, the FATF urges Pakistan to swiftly complete its action plan, particularly those with timelines of May 2019”.
It is pertinent to recall here that Pakistan was grey-listed from 2008 to 2010 and then from 2012 to 2015, but successfully evaded blacklisting. It will not be a big surprise that it will come out of the ‘grey-list’ again instead of being ‘blacklisted’, even in the absence of substantive compliance.
It is now a fight for diplomatic supremacy between Islamabad and Delhi and that will ensure the status of Pakistan. Pakistan has already made some gains. Indeed, during the June 16-21, 2019, meet, Turkey, Malaysia and China opposed the move backed by India, United States, and the United Kingdom to ‘blacklist’ Pakistan. On June 19, 2019, Jean Francois Caution, the Ambassador of the European Union, thus observed,
We are ready to help Pakistan to come out of the grey list of FATF and it is a matter of fact that Pakistan and its people have made tremendous sacrifices to bring peace and security to the country. We acknowledge these sacrifices with our hearts. Apart from terrorism, European Union is standing beside Pakistan in other important sectors too, including education and health.
Currently the FATF has 39 full members – 37 member countries, who have voting rights, and two regional organisations (Gulf Co-operation Council and European Commission). It is of utmost importance for Pakistani interests that Saudi Arabia, its close ally, which was representing the Gulf Co-operation Council since 2015, become a full FATF member, on June 21, 2019. More importantly, Pakistan’s all-weather friend China is all set to secure FATF presidency on July 1, 2019, taking over from the United States. Moreover, the European Union (15 countries having voting rights are members of European Union) has already promised to drum up support for Pakistan.
Being on the grey list has had little impact on Pakistan, as foreign funding for Islamabad remains unabated. Reports indicate that, “being added to the grey list does not imply any economic sanctions, but serves as a signal to the global financial and banking system about heightened risks in transactions with the country in question”.
Significantly, even when Pakistan was on the grey-list between 2008 and 2010 and again between 2012 and 2015, it received International Monetary Fund (IMF) ‘bail-outs’. According to IMF data, Pakistan received its first IMF bail-out in 1958, and another 20 bail-outs thereafter: 1958, 1965, 1968, 1972, 1973, 1974, 1977, 1980, 1981, 1988, 1993, 1994, 1995, 1997, 2000, 2001, 2008, and 2013. An amount of SDR 19.38 billion [1 SDR=1.38 USD"> was agreed on for these bail-out packages, of which SDR 13.79 billion has been withdrawn.
More recently, as Second Sight noted, announcing the 22nd ‘bail-out’ for Pakistan in, the IMF, in a release on May 12, 2019, stated that “the Pakistani authorities and the IMF team have reached a staff level agreement on economic policies that could be supported by a 39-month Extended Fund Facility (EFF) for about US$6 billion”. The release, however, went on to add that “this agreement is subject to IMF management approval and to approval by the Executive Board, subject to the timely implementation of prior actions and confirmation of international partners’ financial commitments”. Among other “commitments”, Pakistan is expected to continue “anti-money laundering and combating the financing of terrorism efforts.” Given past history, the approval is all but certain, even without Pakistan fulfilling these commitments. Crucially, the commitment related to terrorism is unlikely to be fulfilled.
The occasional theatrics of putting Pakistan on the ‘grey-list’ or threatening it with the ‘blacklist’, as well as imposing various conditions to provide ‘bail-outs’ will continue. But with no effective and comprehensive sanctions, there is little hope of Pakistani giving up its policy of using terror as strategic asset.
