FATF must encourage
not punish Pakistan

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By Abdul Basit

As the next plenary of the Financial Action Task Force approaches this month, a fair question to ask is what Pakistan did, or didn’t do, that warranted the FATF to greylist the country in 2018 for the second time.

Pakistan was grey listed by the 39-member inter-governmental Financial Action Task Force (FATF) in June 2018. That was when Pakistan was preparing for the general elections in July, and was being run by a three-month caretaker setup as provided for under the country’s constitution.

Merits or demerits of Pakistan’s case aside, the timing itself showed that the FATF decision was not apolitical. Ideally, the organization should have waited for the general elections to be over and then entered into talks with the new government, outlined its concerns, given some time to plug the legal and regulatory loopholes, and in case of reluctance on the part of Pakistan to do the needful, moved to put the country on the grey list. The way Pakistan was treated, and is in fact being treated by the FATF, reflects poorly on its credentials. After all, according to the FATF itself, barring a dozen or so countries in the world, every other country is still only partially compliant with FATF guidelines. Pakistan was no exception.

Interestingly, this is not the first time Pakistan made the FATF grey list. It had even been on the black list momentarily before it was grey listed in 2012 for the first time. As the country scrupulously addressed several deficiencies in its banking system, it was finally removed from the grey list in 2015.

Pakistan has never claimed that its systems are fool proof. Nor has it ever shied away from acknowledging and fixing them. The best course of action for the FATF would have been to take up with Pakistan its 27-point plan of action with the incoming government in 2018 and worked out timelines for actions on different fronts. By pre-empting the incoming government, the FATF only compounded the situation for Pakistan, and it was rightly inferred by many analysts that the FATF decision was largely politically motivated and driven by geo-political dynamics.

One cannot escape the fact that there are countries which would like Pakistan to fall in line. And this is best done by economic strangulation.

FATF was aware of Pakistan’s massive economic difficulties. With a mounting internal and external debt, a growing current account imbalance and an unsustainable fiscal account deficit, Pakistan, as a front-line state in countering militancy, was rightly expecting it would be supported by the international community.

Instead, what it got was most unfair. The people of Pakistan, having suffered hugely at the hands of militancy both in terms of blood and treasure, should have been facilitated to get to grips with their enormous economic difficulties. Au contraire, the FATF, riding rough shod over Pakistan’s problems, contributed to accentuating its woes, and in the process even restricting political space for the government to legislate through national consensus.

Be that as it may, Pakistan deserves full credit to have come up with an impressive report card. Despite serious issues, Pakistan did remarkably well to be in full compliance of 21 out of 27 action points by October 2020. Islamabad yet again demonstrated how seriously it took its international obligations, primarily in its own national interests. No country can put its economic house in order unless it is willing and resolved to close all possibilities for money laundering and terror financing to the maximum extent possible. Needless to say, many developed economies are still struggling to completely extirpate these dangerous malpractices. In fact, some of them are directly benefiting from money laundering that involves developing countries.

The FATF in October decided to keep Pakistan on its Grey List for failure to curb funnelling of funds to terror groups Lashkar-e-Taiba, Jaish-e-Mohammed and others.

Countries that would never like Pakistan to get off the grey list have already embarked on a malicious campaign against Pakistan. But the FATF must not become hostage to the nefarious political agendas of such countries, if it is to restore its credibility as a fair and transparent organization.

Pakistan has been through many a crisis. It is high time for the FATF to free itself of politically skewed considerations. Pakistan deserves to be appreciated and supported in its unflinching drive against money laundering and terror financing by tightening both its legal and regulatory regimes.

It is thus hoped that the FATF, at its upcoming meeting, will take the right decision by white listing Pakistan. The country has come a long way in fighting militancy and correcting its financial systems. It must be encouraged by the FATF, rather than treated unfairly at the behest of other countries.

(Abdul Basit is the president of Pakistan Institute for Conflict and Security Studies. He was previously Pakistan’s ambassador to Germany and Pakistan’s High Commissioner to India. Twitter: @abasitpak1)