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Pakistan Escapes FATF 'Black List'

February 26, 2020 By Lt. General P.C. Katoch (Retd) Photo(s): By FATF
The Author is Former Director General of Information Systems and A Special Forces Veteran, Indian Army


FATF in meeting.

On February 20, 2020, last day of its five-day meeting to review Pakistan's progress towards the implementation of its 27-point action plan, the Paris-based Financial Action Task Force (FATF) announced that it was retaining Pakistan on the 'Grey List' till June 2020, giving it another four months to fully comply with the goals. The statement released by FATF reads". The FATF strongly urges Pakistan to swiftly complete its full action by June 2020. Otherwise, should significant and sustainable progress especially in prosecuting and penalising terror funding not be made by the next Plenary, the FATF will take action, which could include the FATF calling on its members and urging all jurisdiction to advise their financial institutions to give special attention to business relations and transactions with Pakistan." Pakistan was placed on the 'Grey List' of FATF in June 2018 and was given a plan of action to complete by October 2019 or face the risk of being placed on the watchdog's 'Black List', along with Iran and North Korea.

Pakistan now needed 12 votes out of 39 to transit from the 'Grey List' to 'White List' but failed to achieve that though Turkey and Malaysia supported Pakistan. Just a week prior to the FATF Plenary, a Pakistani court sentenced Hafiz Saeed, founder of Lashkar-e-Taiba (LeT) and mastermind of the 2008 Mumbai terror attacks, to 11 years jail in two terror cases. Hafiz Saeed is a UN designated terrorist with $10 million bounty by the US. He had been arrested on July 17, 2019 on terror financing charges. Notably, Pakistani journalists have reported in the past that jail for terrorist mullahs in Pakistan implies red carpet environs, VIP treatment under ISI tutelage and freedom for anyone (terrorist cadres and military included) to meet him in the so-called jail. The drama of sentencing Hafiz Saeed obviously was to exit the 'Grey List' possibly in consultation China who chairs the FATF presently. It is quite likely that Hafiz Saeed may continue in jail till Pakistan can exit the 'Grey List' and then let off following an appeal engineered at appropriate time.

Logically, Pakistan should have been placed on the 'Black List' with the FATF deadline having elapsed in October 2019 and still having acted on only 14 of the 27-point plan of action defined by the FATF in June 2018. Referring to the expired deadlines, the FATF again expressed concerns given Pakistan's failure to complete its action plan in line with the agreed timelines and in light of the terror funding risks emanating from the jurisdiction. The FATF wants Pakistan to continue addressing its strategic deficiencies including application of remedial actions and sanctions in cases of Anti-Money Laundering (AML) and combating the financing of terrorism violations relating to Terrorist Funding (TF) risk management and Targeted Financial Sanctions (TFS) obligations. But Pakistan is sitting in Beijing's lap and China sides fully with its protégé. In the previous FATF meeting held in Beijing, Pakistan had got the support of Malaysia, Turkey and China. If this time China was non-committal it was possibly because it expected Pakistan to be taken off the 'grey list' with the Hafiz Saeed sentencing drama. The bigger reason possibly was having been caught suppressing the Coronavirus (Wuhan 400) amidst speculation it is part of China's biological warfare programme gone awry, and videos emerging of Chinese security forces bashing foreign reporters covering Coronavirus in China that has drawn adverse comments around the world. Our media hyped this as China supporting India at the FATF, which is sheer stupidity. China remains fully with Pakistan on the issue of terrorism and terror financing. What more proof is needed when reports in the past indicated Chinese funds aiding terrorism in Jammu and Kashmir?

Immediately after the FATF's February 2020 Plenary, Chinese foreign ministry spokesperson Geng Shuang told media, "Pakistan has made enormous efforts in improving its counter-terror financing system, which has been recognised by the vast majority of FATF members at its latest plenary meeting concluded on February 20 in Paris. It was decided at the meeting that Pakistan will be allowed more time to continue implementing its action plan". China should be expected to go all out to get Pakistan off the FATF grey list at the next meeting in June. Another drama of token action against say another UN-designated terrorist mullah like Masood Azhar heading Jaish-e-Mohammed (JeM) who has been spirited off by the ISI, or terror-financier Dawood Ibrahim could be enacted. Pakistan would be higher on Beijing's pedestal having engineered the US-Taliban peace deal that may be signed on February 29, paving exit of US troops from Afghanistan – which both China and Pakistan have wanted since long. As for placing Pakistan on FATF 'Black List', it requires just three countries support to avoid it. Turkey and Malaysia are already in the bag and China will join in if a third country support is found wanting. Yes, continuing on the 'Grey List' makes it difficult for Pakistan to obtain financial aid from the IMF, World Bank, ADB, European etc but Pakistan will not be allowed to sink economically and will obtain financial assistance by countries supporting it especially China as in the past. Recall that the IMF on July 3, 2019 approved a 39-month extended arrangement under the Extended Fund Facility (EFF) for Pakistan for an amount of SDR 4,268 million (about $6 billion or 210 per cent of quota) to support the authorities' economic reform programme. For that matter, North Korea has not collapsed despite all the sanctions past several years.