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Pakistan may escape FATF black list, but pressure mounts to curb terror financing

BusinessToday.In     October 18, 2019

The Financial Action Task Force (FATF) meet, which ends on Friday, will see Pakistan and its friendship with Beijing take centrestage. Will the global financial body blacklist Pakistan for non-compliance in curbing terror financing, something India has long lobbied for, or will it remain on its grey list till the next plenary in February 2020, that is the big question.

The buzz is that Pakistan will avoid getting on the black list yet again, thanks to support from China, Turkey and Malaysia. Significantly, China, Pakistan's all-weather ally, holds the current FATF presidency. Two top government officials told Reuters that in a recent visit to Beijing, Pakistan's civil and military leadership secured a guarantee from Chinese leaders that Islamabad would not be placed on the black list.

These three countries had protected Pakistan in June 2018 as well, landing the country in the less-dire FATF grey list instead. A country needs to secure three votes to avoid inclusion in the black list alongside Iran and North Korea. At the same meet, Islamabad had 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 plenary meeting. Pakistan presented its compliance report to the FATF in Paris on Monday.

Repeating its past trick of last-minute whitewashing, Pakistan had also arrested four terrorists closely associated with global terrorist Hafiz Saeed on charges of terror financing just ahead of the FATF meet. Saeed was taken into judicial custody in July. Having reportedly landed on the black list between 2012 and 2015, it is clearly keen to avoid a repeat.

Getting blacklisted would spell serious consequences for Pakistan's financial sector and its economy overall since FATF members could, as an ultimate recourse, even decide to restrict, target or even prohibit financial transactions with it. This would not only negatively impact foreign investor sentiment but also lead to a downgrading of the country by multilateral lenders such as the International Monetary Fund (IMF), which has approved a $6 billion loan package for the country, World Bank, ADB, EU and also a revision in risk rating by Moodys, S&P and Fitch.

India, on its part, had cited a recent report by the Asia Pacific Group on Money Laundering (APG) that monitors compliance, to push for the neighbouring nation's blacklisting. APG, one of the nine FATF-styled regional groups, has 10 parameters for 'Effectiveness and Technical Compliance Ratings' and 40 for 'Technical Compliance Ratings'. Of the 10 parameters on effectiveness, Pakistan was found 'low' in nine areas and 'moderate' in one. Of the 40 parameters on technical compliance, the country was found 'compliant' in only one, 'partially compliant' in 26, 'largely compliant' in 9 and 'non-compliant' in 4, which are mandatory if it wants to get off the grey list.

The report added that the country should adequately identify, assess and understand risks associated with militant groups operating within its borders such as Islamic State group, al-Qaeda, Jamat-ud-Dawa (JuD), Lashkar-e-Taiba and Jaish-e-Mohammad (JeM), which continue to raise funds openly.

Hence, although Pakistan may be reasonably confident of avoiding blacklisting today, at best it would have earned itself a breather till next February. According to officials and analysts, the country won't be off the hook till it proves that it is genuinely severing ties with Islamist militants.

With Reuters inputs

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