Pakistan Will Remain in the FATF Grey List – But That’s Not Enough

Less than two weeks before it meets for a full-scale review, the Financial Action Task Force (FATF), the global money-laundering watchdog, had criticized Pakistan for its “meager progress” for complying on only two of the 40 recommendations. The FATF’s Asia-Pacific Group (APG) said it had retained Pakistan on its “Enhanced Follow-Up” list, Dawn reported on October 12.

The APG is the regional affiliate of the Paris-based FATF, which is scheduled to hold a virtual meeting October 21-23, with Pakistan’s performance in curbing terror finance on top of the agenda.

The newspaper, however, claimed that the APG, in its first Follow-Up Report (FUR) on Mutual Evaluation of Pakistan, had shown the country “improving” its full compliance on two of the 40 FATF recommendations on the effectiveness of anti-money laundering and combating financing terror (AML/CFT) system. It also claimed that the APG report would have “no immediate bearing” on the FATF’s scheduled review on October 21-23, “whether it should be retained or moved out of the grey list.”

These technical hide-and-seek games notwithstanding, there is little doubt that the FATF is unhappy with Pakistan’s performance, diplomatic sources monitoring the subject say. The assessment is that Pakistan is keen to somehow retain its position on the grey list and not be dragged to the black list that brings serious economic repercussions.

The development comes even as India has mounted a determined effort to hold Pakistan responsible for its role in supporting terrorism and terrorist infrastructure.  But India is up against a spiteful China that is ready to fight it across fora. India hopes that the United States — even though somewhat distracted by its presidential election scheduled for November 3 — will use forceful diplomacy to keep Pakistan pinned down on its failure to meet the FATF directives that, in normal times, would have probably dragged Islamabad down to the black list.

Known battle-lines are being reinforced. The Sino-Pak efforts appear to have once again succeeded in roping in Turkey and Malaysia. For China, the battle is crucial because its own financial transactions in Pakistan have come into question. But then, China is also the current chief of the Asia-Pacific Group, making the task of India and the U.S. more difficult.

A confident Chinese envoy to Pakistan, Yao Jing, told The News International of Pakistan on September 19 that the “FATF’s October review will go well for Pakistan,” triggering speculation that the line-up of its “saviors” may get Pakistan out of the FATF’s clutches altogether. India’s and its partners’ task could become more difficult since Pakistan, allegedly at Chinese behest, has reportedly engaged the Houston-based lobbying firm Linden Strategies to push its case with the Trump administration. And China could very well be behind the Pakistan’s efforts to escape the clutches of the FATF since the future of the $60 billion China-Pakistan Economic Corridor (CPEC) depends upon Pakistan’s economic solvency, which, in turn, rests on its ability to stay away from the FATF black list.

Based on the analysis of well-placed Afghan sources, the likely brief from Pakistan for the lobbying firm is as follows.

First, it will seek to convince the Trump administration that the main leadership of the Taliban, Haqqani Network, al-Qaida, and so-called Islamic State global terrorist groups is based in Afghanistan with sufficient funds available to them. This would imply that Islamabad has disavowed the Taliban shura and the Haqqani Network and that there is no hand of Pakistan’s deep state in al-Qaida or the Islamic State in Afghanistan. However, the fact of the matter is that Haqqani Network chief Sirajiuddin Haqqani is the sword arm of the Taliban as its deputy leader, with Maulvi Hibatullah Akhunzada being a cleric.

Second, it will argue that the Muridke-based Lashkar-e-Taiba (LeT) remains defunct and terror financing cases have been registered against most of the identified leaders of Jamaat-ud-Dawa and Falah-e-Insaniat foundations. The fact is that LeT chief Hafiz Saeed, a key accused in the 26/11 Mumbai attacks, has handed over the reins of the proscribed group to son Talha, who is instigating violence in, and is in touch with, sleeper cells in India-administered Jammu and Kashmir.

Third, it will claim, at the behest of the Imran Khan government, that the Bahawalpur-based Jaish-e-Mohammed (JeM) terrorist group follows a unique model of operation. While its key leaders are not in Pakistan, the group is operating through its sympathizers. In reality, JeM’s chief  Masood Azhar has a serious medical condition and is bed-ridden in Bahawalpur. His brother Mufti Rauf Asghar now operates the group with training camps both in Pakistan as well as across the Durand Line in Afghanistan. The JeM’s Kashmir operations head is Kasim Jan — a key accused in the 2016 attack on the Indian air force base in Pathankot —  who gets his instructions from Asghar.

Finally, Pakistan and lobbyists on its behalf would claim that it has successfully convicted four designated persons and two other senior leaders, and that terror financing cases have been instituted against 11 designated persons (61 cases) and eight other leaders (37 cases). The fact, however, is that according to FATF’s 2019 Mutual Evaluation Report there were 66 organizations and approximately 7,600 individuals proscribed under United Nations Security Council Resolution 1373, which was passed to prevent terror acts after the 9/11 attacks.

Beyond stepping up its lobbying efforts, Pakistan has also taken care that it does not annoy the United States amidst a toxic election campaign. The Pakistan Supreme Court has extended by three months the custody of a suspect in the killing of American journalist Daniel Pearl, accepting an appeal by Pearl’s parents for justice, despite the suspect’s acquittal by a lower court. The suspect, Omar Saeed Sheikh, is also allegedly behind many other terror attacks.

Besides weighing India’s complaints along with placating American concerns, the FATF will have to factor in Pakistan’s performance in enacting legislation aimed at curbing money flow into terrorism. The unstated part here is that the actual enforcing of these laws would also need to be monitored.

But Pakistan has fallen woefully short on enactments. According to the FATF norms, Pakistan must meet at least 13 of the 27 parameters laid down by the watchdog to come out of the “grey list.” While it may have gotten the three votes — China, Turkey, and Malaysia – needed to escape the black list, it would also need approval from 12 out of the FATF’s 39 members to exit the “grey list,” which it has not been able to get so far.

Despite high-level diplomacy and hiring a top lobbying firm and offering its leverage with the Taliban to the U.S. for reduction of violence in Afghanistan, Pakistan will not be able to escape the grey list this time. But that is simply not enough.

Mariam Solaimankhail is member of the Wolesi Jirga Lower House of the Afghan Parliament representing the Nomadic people of Afghanistan.  She is part of the National Interests Preservation Group, and of the 19 Members of Parliament who recently sent a letter to the U.S. Congress regarding Afghan Peace Negotiations.

Published in The Diplomat, October 21, 2020