Afnan Wasif
In 1989, the G7 countries introduced FATF as a temporary forum to tackle the rising issue of money laundering. In 1990, the FATF released a report containing 40 recommendations, which eventually became the central norms through which a comprehensive plan was provided to fight money laundering (hereafter, ML) and terrorist financing (hereafter, TF). The key difference between the two crimes is that ML necessarily entails an illicit source of funds, whereas TF may come from legitimate sources like donations, as long as the purpose of the funds is criminal. It must be noted that the FATF’s role in global financial governance has become more prominent over the last few decades as it expanded its mandate in October 2001 after 9/11. FATF categorizes countries with a fragile AML/CFT regime as ‘jurisdictions under increased monitoring’ (grey-listed), while countries with significant strategic deficiencies are labeled as ‘high-risk jurisdictions’ (blacklisted). Pakistan’s FATF grey-listing, starting in 2008 and till 2019, may have resulted in cumulative real GDP losses of approximately USD 38 billion. Moreover, estimates indicate that a large proportion of this response (?58 percent) was driven by the reduction in consumption expenditures (both household and government). Exports and inward foreign direct investment are also partially responsible for this decline in GDP, with associated cumulative losses of USD 4.5 billion and USD 3.6 billion respectively. These results point to the significant negative consequences associated with FATF grey-listing. The FATF asked Pakistan to comply 27-point Action Plan to delist from the grey list. Pakistan adopted several concrete measures including an Amendment in the Antimony laundering Act (2010), the enhanced role of the Federal Board of Revenue (FBR), Federal Investigation Agency (FIA), State Bank of Pakistan (SBP) and stringent measures by the interior ministry of Pakistan to choke financial lifelines of terrorist networks. But at the FATF meeting held in Paris on June 29, 2018, approval was given to put Pakistan on the gray list. India did its utmost to put Pakistan on the gray list by justifying its failure to take strong action against Hafiz Saeed, Jaish-e-Muhammad, Falah-e-Insaniat Foundation, Lashkar-e-Taiba, Muslim Milli League, ASJW, Jamat-ud-Dawa (JuD) and other religious organizations allegedly involved in the Mumbai attacks and other terrorist activities. The reality is quite the opposite. Hafiz Saeed has also been jailed for 31 years. Organizations such as the Falah-e-Insaniat Foundation have also been banned. Apart from this, Pakistan has also completed most of the tasks given by FATF. Acknowledging Indian influence and interference in FATF, the Indian Foreign Minister said in a statement: “The BJP government led by Narendra Modi has ensured that Pakistan remains on FATF’s gray list. Because of us, Pakistan is under the supervision of FATF and has been placed on the gray list.” According to the FATF terms and conditions if a minimum of three countries still support Pakistan to stay out of this then Pakistan will be delisted from FATF. But the U.S. lobbied Saudi Arabia, China, and Turkey to convince them to make the decision against Pakistan. Likewise, the Indian government resorted to China and promised them support in the FATF leadership in the future. Hence, New Delhi played a central role to place Pakistan on the grey list. Other sources say that it was the U.S. who convinced China on the grounds that it would be given vice president-ship of the FATF if it supported the proposal of putting Pakistan on the grey list. Similarly, Saudi Arabia was influenced by the U.S. lobbying as Saudi Arabia is an observer state and it wants to upgrade itself to a full member for whom it will require the support of the U.S. afterward. Hence, Pakistan could not attain the support of its allies China and Saudi Arabia, who failed to support Pakistan at that moment. Ironically, Saudi Arabia and China have strong bilateral relations with Pakistan but Indo-US convergence of interest pulled Saudi Arabia and China into the orbital influence of the U.S. Turkey on the other hand stood by Pakistan’s side and opposed the proposal yet Turkey supported couldn’t keep Pakistan out of FATF grey list. The announcement on Friday, 17 June 2022, by Marcus Pleyer, president of the Financial Action Task Force (FATF), was great news for Pakistan and its public, which said it has mostly complied with the organization’s tasks set for Islamabad. Pleyer said an onsite inspection by FATF in Pakistan would be done before October, and a formal announcement on Pakistan’s removal would follow. He said FATF is praising Pakistan for implementing the organization’s action plans – a clear indication that Pakistan is moving closer to getting off the “gray list”. This achievement will result in prosperity and project a better image of Pakistan on the international stage. It will strengthen the confidence of foreign investors as it will be secure for them to invest in Pakistan. FATF white listing will make life especially easier for Pakistani expatriates and overseas citizens who send significant remittances. Pakistan coming into white list will enjoy various trade opportunities, upgrade of ratings and an expanding economy.
(-The author is a student of Strategic Studies at National Defence University, Islamabad. He could be reached at [email protected])