THE upcoming session of the FATF plenary (Feb-22-25) in Paris holds much significance. Pakistan has asked the global watchdog on money laundering and terror financing, to remove the country from the grey list after it claimed to have seen the exposure of Indian propaganda by the European Union (EU) DisinfoLab. Islamabad has been on the FATF’s Compliance Document, also known as its Grey List, since June 2018 for alleged terrorist financing and money laundering risks after an assessment of the country’s financial system and security mechanisms. The UN report on terrorism has warned that there is a significant number of ISIS terrorists in two states of India, namely Kerala and Karnataka and proven facts that India is financing and supporting terrorism, adding that FATF has still not initiated any action on the serious matter against New Delhi. Pakistan has been calling on FATF to remove its name from the Grey List as its crippling economy is making life of locals more and more difficult with each passing day.
More importantly, Pakistan authorities have handed over documentary evidence of full implementation of 21 out of 27 points to the authorities while assuring significant progress on the remaining six points. It was learned that about 50 to 70 percent of work has been completed on the implementation of these 6 points. Back in October last year, FATF decided to maintain Pakistan’s status on its ‘grey list’ of countries with inadequate control over curbing money laundering and terrorism financing, media has reported. “The plenary decided to keep Pakistan in ‘grey list’ until February 2021 despite the country has successfully complied with 21 out of 27 points of action,” said the FATF President Marcus Pleyer.
The Asia Pacific Group (APG) is also an inter-governmental organization like FATF. APG considers the basic 40 recommendations of FATF as an international standard for judging the performance of different countries. India became a member of APG in May 2019, which means that now India will also evaluate the performance of Pakistan. The relations between Pakistan and India are rocky, so considering that its evaluation will be biased, Pakistan protested this decision. On 14 Oct 2020, APG presented its review report to FATF. This report claimed that out of 40 recommendations of FATF, Pakistan only acted upon the two. Hence, it is clear that it was a biased review, moreover, Pakistan claimed that this review report contains the claims that were made before February 2020.
In the past, Pakistan came out of the Grey List on 27 February 2015 with FATF remarking: “Pakistan will work with APG as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report, in particular, fully implementing UNSC Resolution [United Nations Security Council Resolution] 1267.” This structural weakness in the FATF is also reflected in the somewhat brittle or simplistic categorisation structure of different jurisdictions into so-called white, grey and black. This straight jacketed view may not permit a flexible and graduated response.
But Pakistan is also aware of this dilemma, that the only option available to the FATF after the grey list is one it may not be willing to take. So in place of gaining leverage the FATF is actually losing it through this structure. This high threshold provides considerable space for manipulation and manoeuvre to a country like Pakistan. The fact remains that there is much pressure on the developing economy such as Pakistan which because of being listed in the Grey List loses much on global level. Analysing the problem faced by the FATF and risk associated with all the available options, some scholars have tried to take the middle ground and suggest keeping Pakistan in the Grey List only. The drumbeat that Pakistan remains unable to meet the FATF compliance is a partisan approach.
In its last meeting held in October last year, the watchdog had decided to retain Pakistan on the list of ‘jurisdiction under enhanced monitoring’ till the review in February 2021 when the status of its compliance with recommendations would be assessed again. Some analysts view that the so-called jurisdiction of an enhanced monitoring is nothing but political instrumentalisation-cum-economic exploitation at the part of the FATF.
They argue that every developing economy undergoes such traumas. Jurisdictions under increased/enhanced monitoring are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing. When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring.
The FATF and FATF-style regional bodies (FSRBs) continue to work with the jurisdictions noted below and to report on the progress made in addressing the identified strategic deficiencies. The FATF calls on these jurisdictions to complete their agreed action plans expeditiously and within the proposed timeframes. The FATF welcomes their commitment and will closely monitor their progress. The FATF does not call for the application of enhanced due diligence to be applied to these jurisdictions, but encourages its members to work vigilantly and methodically.
The FATF continues to identify additional jurisdictions, on an on-going basis, that have strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. A number of jurisdictions have not yet been reviewed by the FATF and FSRBs. In December, 2020 FATF was using numerous case studies from around the FATF’s Global Network, this new FATF-Egmont Group report aims to help public and private sector with the challenges of detecting trade-based money laundering.
“FATF had assessed Pakistan to have completed 21 of the 27 Action Items under the current Action Plan. In the remaining six partially addressed items, significant progress has been made by Pakistan, which is duly acknowledged by the wider FATF membership,” a Foreign Office statement said on last Friday. What Pakistan expects from the upcoming FATF moot is that while reviewing Pakistan case, the FATF body must look both intentions and the practices that Pakistani Government has been trying to expediently fulfil the FATF demands.
—The writer, an independent ‘IR’ researcher-cum-international law analyst based in Pakistan, is member of European Consortium for Political Research Standing Group on IR, Critical Peace & Conflict Studies, also a member of Washington Foreign Law Society and European Society of International Law.