It's going to be a worrying week for Pakistan with a smarting India pulling out all stops to get the Financial Action Task Force (FATF) to blacklist it. According to officials, our security agencies have prepared a dossier nailing the culpability of Pakistan in the Pulwama terror strike, which is the worst such attack in J&K in decades. This dossier will be handed over to the international terror financing watchdog seeking its blacklisting, officials told PTI on Saturday. Over 800 officials representing 205 jurisdictions, the IMF, UN, World Bank and others are currently in Paris for the ongoing FATF Week (February 17-22).
What is FATF?
FATF is an inter-governmental body established in July 1989 at a Group of Seven (G-7) Summit in Paris, initially to examine and develop measures to combat money laundering. But in 2001, the body expanded its mandate to incorporate efforts to combat 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," reads the official website. To this effect, the FATF has developed a series of recommendations that are recognised as the international standard for combating of money laundering as well as the financing of terrorism and proliferation of weapons of mass destruction in order to ensure a level playing field.
The FATF, which reportedly comprises 36 countries and two regional organisations (European Commission and Gulf Cooperation Council), works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse. Its decision making body, the FATF Plenary, meets three times every year to review threats and monitor the progress of its members in implementing necessary measures.
What can India do to Pakistan at FATF?
In June 2018, Pakistan was put on the FATF grey list for failing to curb terror financing, courtesy a concerted bilateral effort by India with the US, UK, France and Germany all through 2017. Islamabad had reportedly been given a 27-point action plan to implement by September 2019, failing which it would be put on the FATF black list post the October 2019 FAFT meeting.
Hence, the dossier puts Pakistan's already tenuous position with the FATF further at risk. In the wake of the Pulwama terror attack, India can lobby FATF to blacklist Pakistan.
In fact, India has reportedly prepared a dossier based on the evidence gathered so far related to the February 14 attack, carried out by Pakistan-based outfit Jaish-e-Mohammad (JeM). "This will be a dossier on Pakistani agencies' links with the JeM and how the terror group is being aided by them. The details of the terror attacks carried out by the JeM in the past will be mentioned in the document," said a security official. The dossier will reportedly also highlight how the Pakistani agencies are providing funds to the JeM.
What happens if Pakistan gets blacklisted?
The FATF black list means the country concerned is "non-cooperative" in the global fight against money laundering and terrorist financing. Currently, the list is populated by North Korea and Iran. If Pakistan lands on the list, FATF members could, as an ultimate recourse, even decide to restrict, target or even prohibit financial transactions with it. This spells serious consequences for Pakistan's financial sector and its economy. It may not only negatively impact foreign investor sentiment but also lead to a downgrading of the country by multilateral lenders like the International Monetary Fund (IMF), World Bank, ADB, EU and also a revision in risk rating by Moody's, S&P and Fitch.
According to Reuters, Pakistan is likely to secure an IMF bailout soon to stave off a balance of payment crisis and help shore up its economy - the country's foreign currency reserves have reportedly dwindled to around $8 billion, just enough to cover about two months of imports. Landing on the FATF black list might jeopardise such plans.
(Edited by Sushmita Choudhury Agarwal; with agency inputs)