Amid simmering political polarization and pandemic crisis, Pakistan remains under the Financial Action Task Force (FATF) radar as the terror financing watchdog again decided to retain Pakistan in the grey list asking the country to complete concurrent action plans. However, it already had complied with 30 of 34 recommended items. In addition to that, Turkey, Jordan, and Mali are also added to the grey list, while Ghana will no longer be subject to the FATF’s increased monitoring process. Following its plenary meeting in October 2021, President of the FATF– Marcus Player, stated that “Pakistan has already completed the majority of action points. This shows the clear commitment of the Pakistan government. So there was no discussion on blacklisting. The government is cooperating with FATF and we urged it to very quickly address the remaining four items as soon as possible.”
In retrospect, Pakistan emerged amongst the states that have shown maximum cooperation and intent to mitigate this global challenge; nevertheless, its status in the FATF remains to steer and to wobble over the period. FATF added the terror financing clause in 2001 expanded its scope of surveillance; since then, it has kept Pakistan under its critical scrutiny. The country has spent three years from 2012 to 2015 in the grey list status of the FATF. It has been dealing with the looming uncertainty of FATF compliance protocols through legislative measures and vowing full cooperation aligned with the guiding principles of FATF protocols. Since the year 2018, the government of Pakistan has taken practical and determining corrective measures to improve Anti-Money Laundering (AML) and Counter-Terror Financing (CTF) processes. Initially, Pakistan focused on the operations by Law Enforcement Agencies (LEAs) and created task forces & governmental bodies for the implementation of resolutions 1267 and 1373 of the United Nations Security Council (UNSC).
Despite numerous constraints, the current government in Pakistan has effectively dealt with the challenges of money laundering and terror financing issues. It has carried out a comprehensive reformative measure mechanism to consolidate surveillance, monitoring, and accountability. In particular, during the worst global pandemic crisis of Covd-19, it kept its ambitions and goals intact vis-à-vis addressing this alarming challenge. Nevertheless, ironically, the country remains on the grey list despite having sacrificed around 80,000 lives and suffering the economic loss of $150 billion after joining the US-led war against terrorism.
There is no doubt that the FATF policy approach towards Pakistan is politically biased. This prejudice discourages the efforts of a state that proactively promotes the emblems of peace, prosperity and a regional security environment. For instance, there are sufficient proofs of Indian state-sponsored terrorism in Afghanistan, Pakistan, and Sri Lanka, but the FATF agency has unable to hold India accountable. This duplicity towards Pakistan and favoring Indian deceitful acts seemingly associated with the economic interests of the FATF’s stakeholders associated with Delhi. In addition to it, the report of EU DisinfoLab, titled “Indian Chronicles: deep dive into a 15-year operation targeting the EU and UN to serve Indian interests”, exposed the Indian fake networks of dead think-tanks, ghost NGOs, media outlets, and even dead people which have been used to spread fake propaganda to serve the vested interests of India particularly to undermine Pakistan. Pakistan’s stance on Indian involvement in maligning its image, sponsoring & facilitating the terrorist activities inside Pakistan stands vindicated after the EU DisinfoLab report. But the FATF’s intended attempt to overlook Indian role in financing terrorism and money laundering continues.
Furthermore, even after the revelation of this heinous criminal act, the FATF hardly took any notice or action of the respective matter. This disparity entails the irrational behavior of FATF that favors the Indian interests, and while pushing hard Pakistan serves the Indian regional interests. One of the dismaying factors, the majority of the FATF compliances is non-compatible with Pakistan’s social, normative, and social structure. Masses are unaware of the features that FATF declares illegal; thus, it’s a systematic process that would take time to contemplate and comprehend society and the intuitions. The Indian External Affairs Minister S. Jaishankar confessed to influencing the FATF to keep Pakistan on the “grey list,” which raised serious questions on the integrity of the watchdog. Reacting strongly, Pakistan’s Foreign Minister Shah Mehmood Qureshi said, “manipulating an important technical forum for narrow political designs against Pakistan is disgraceful but not surprising for the Modi Government.”
“The FATF decision to keep Pakistan in grey-list is discriminative; for instance, the non-compliance ratio of France – home to FATF headquarters – is 25%, but the watchdog has turned a blind eye. Similarly, other countries, including the US with a non-compliance ratio of 22.5%, Japan 27.5%, New Zealand 30%, Georgia 32.5%, South Korea 20%, and Russia 12.5%, are out of the grey list. Pakistan has long been observing that the watchdog was being used as a political tool to serve the vested interests of some countries and the recent enlistment of Turkey in the grey list has substantiated the claim.”
Likewise, Indian news agency ANI quoted Jaishankar; “Due to us, Pakistan is under the lens of FATF, and it was kept in the grey list.” The FATF decision is disseminative; for instance, the non-compliance ratio of France – home to FATF headquarters – is 25%, but the watchdog has turned a blind eye. Similarly, other countries, including the US with a non-compliance ratio of 22.5%, Japan 27.5%, New Zealand 30%, Georgia 32.5%, South Korea 20%, and Russia 12.5%, are out of the grey list. Pakistan has long been observing that the watchdog was being used as a political tool to serve the vested interests of some countries, and the recent enlistment of Turkey in the grey list has substantiated the claim.
This assertion can be further validated by the fact that the top US financial watchdog, US Treasury Department’s Financial Crimes Enforcement Network (FinCEN), in its reports, filed on 23 September 2020, exposed the involvement of 44 banks, including the state-owned banks of India for money laundering of 2 trillion USD which used for financing the terrorism peculiarly in the region. The Suspicious Activity Reports (SARs) found that over 2000 suspicious transactions happened between 2011 and 2017, which amounted to 1 billion USD.
Before the disclosure by the FinCEN, the United Nations’ report revealed a significant number of terrorist groups present in Assam, Kerala, and Karnataka. Moreover, there are also tangible evidence that India is financing terrorism in Pakistan via Afghanistan, and Islamic State – Khorasan Province (ISKP)is also getting manpower from India. The Financial Crimes Enforcement Network (FinCEN) report also recommended that the FATF should take part in controlling and containing these illegal and criminal activities. But the FATF continued to give unjustifiable favor to India, and Pakistan retained on the grey-list even with substantial progress.
The following assertions highlight the technical vulnerability of the FATF system in system. In the co-relational context, such systematic problems have been a significant issue for Pakistan to pursue its case. Acknowledging that Pakistan has made significant progress and considering the positive intent, then demanding the precision of manual book is unjustified. Factually, ML & TF is a global challenge; therefore, to attain 100% precision or complete transparency is inevitable. Therefore, the FATF mechanism of ensuring inclusive transparency is a defective policy that has proven redundant in most case while implementing its guided reformative measures. Since criminality is embodied with pessimistic human nature, it cannot be averted overnight, so is the case with Money Laundering. It has become excessive global malpractice, and a codified manual book cannot prove effective for a state with different challenges. Most FATF compliance protocols are designed based on preemptive strategies with a limited scope of implementation and exception. Pertinent to mention that ML/TF is driven from the illicit social practices therefore, it requires a pragmatic and reactive response following the particular conditions and circumstances of a particular case. FATF holds a blending mechanism for the Terror Financing and Money Laundering (ML/TF) that complicates the assessment process of a state. Since ML/TF is spread globally, therefore, its compliance protocols do not give the state to have accessibility beyond the territorial jurisdiction. Above all, no state in the world has complete transparency in its system regarding money laundering and Terror Financing, it’s a dynamic process, and it holds uncertainty. Even the central developed states those are founding members of FATF are more vulnerable to this global germ. However, the trajectory of FATF assessment is none-aliened to this particular understanding. Merely pushing the state to bring constitutional/ legal reforms does not bring systematic transparency.
The FATF also lacks policy principles about intervening imperative. For instance, the unprecedented catastrophe that state witnesses or faces that includes climate disasters the non-traditional security challenges are not considered by the FATF while reviewing its progress of the case. Merely extending or giving the grace period hardly makes sense because such imperatives drastically influence the social, economic, and policy patterns of that country, and in the majority of the cases the prioritizing goals are also changed by the policymakers. The emerging of new technologies has further complicated the process of ML/TF patterns across the globe. In particular, crypto-currency is one of the key determinants of the issue. The FATF also has no proper strategic mechanism to address such growing technical concerns. There is very minimal global cooperation at the regional or inter-state level among the states. However, money laundering is transnational in most cases; the FATF investigation comprised unilateral actions against the state agencies. That confines the jurisdiction sphere of the investigation.
Pakistan can opt following reformative measures to overcome the challenges posed by the FATF compliance protocols:
- Pakistan should lodge a strong protest against the FATF prejudice and duplicity at every global forum. Despite countless concrete evidence of the Indian involvement in terrorism, FATF is deliberating ignoring the Indian case. In account of this, a worldwide campaign should be initiated by vindicating the fresh dossier that contains evidence of Indian state sponsor terrorism. Mobilize the worldwide lobbies to highlight Indian heinous involvement ML/FT, and craft a considerable narrative of blacklisting India. Indian state-sponsored terrorism holds a spill-over impact on Pakistan’s Anti-Money Laundering (AML) drive; therefore, it can be used as a counter-narrative policy principle.
- Urging the stakeholders that it has been at the forefront in the fight against terrorism and should benefit from a collaborative instead of punitive policy from FATF. Furthermore, there should be a uniform approach for assessing the ML/TF cases across the globe, irrespective of personal interest’s power status to influence.
- Domestically, Pakistan should ensure that virtual asset service providers are regulated for AML purposes and licensed or registered, and subject to effective systems for monitoring.
- Pakistan should establish a comprehensive “inter-agency mechanism” led by the autonomous designated authority to ensure inter-institutional cooperation and coordination to broaden the scope of the investigation process.
- The establishment of financial intelligence units would assist in coordinated surveillance over terrorist financing, illicit transactions, and controlling predicate offenses.
- A rounded policy for extradition requests must be formulated instantly for convicted criminals to ensure accessibility beyond national jurisdictions.
The critical impediments for Pakistan are deficient inter-state linkages to deal with proclaimed offenders and punishment for dual terror financing criminality. International cooperation would serve to take expeditious action against such actors.
- To warrant a transparent investigation and prosecutions process, current domestic law ensues ambiguous configuration regarding criminalizing money laundering and the mechanism of imposing proportionate sanctions against the convicted money laundering actors that require legal framework amendments.
- One of the significant areas that seek the utmost attention of relevant authorities is to freeze, confiscate laundered property, or, the proceeds of, or used in, the financing of terrorism, terrorist acts, or terrorist organizations. In this domain, the key impediments for Pakistan are deficient inter-state linkages to deal with proclaimed offenders and punishment for dual terror financing criminality.
- International cooperation would serve to take expeditious action against such actors. Additionally, a rounded policy for extradition requests needs to be formulated instantly to ensure accessibility beyond national jurisdictions.
- There is a dire need to extend monitoring and surveillance architecture. Our Financial institutions should be restricted from registering anonymous accounts or fictitious names. To manage and mitigate the risks emerging from virtual assets, Pakistan should ensure that virtual asset service providers are regulated for AML purposes and licensed or registered and subject to effective systems for monitoring.
- The preemptive risk-based approach would allow Pakistan to anticipate in accordance with the suggested framework of the FATF requirements for adopting a more flexible set of measures to target their resources more effectively and applying preventive measures that are commensurate to the nature of risks of money laundering and terror financing in the country. Notwithstanding our compulsions of the FATF proceedings, the country seeks a sustainable holistic approach cognizant of the stemming threats to the national security apparatus from the terror financing and money laundering actors.
- The policy of bringing precision in the system is hardly acknowledged by the FATF; instead of further replicating the FATF reformative manual, Pakistan should engage lobbies for seeking assistance regarding FATF status. Likewise, Pakistan should also pursue diplomatic maneuvering with the key actors of the FATF body to get favorable concessions.
To conclude, despite Pakistan’s significant and unusual progress vis-à-vis Action Plan, the FATF has been biased in the case of Pakistan. To maintain the organization’s credibility and uphold the mandate, the FATF must remove Pakistan from the grey-list as there is no justifiable reason left for FATF to keep Pakistan on the list. Rather than becoming a pawn in the hands of “few” the organization should decide according to the organization’s mandate.