Grey-listed, again

Syeda Mamoona Rubab wonders why Pakistan keeps returning to the FATF grey list every few years

Grey-listed, again
Pakistan is now formally and officially back on the ‘Grey List’ of Financial Action Task Force (FATF), the global money laundering watchdog, after successfully negotiating an action plan which the country’s leadership has committed to implementing over the next 15 months.

While officially notifying Pakistan on the grey list, FATF, whose proceedings are carried out in secrecy, in a public statement said, “The FATF has identified Pakistan as a jurisdiction with strategic Anti-Money Laundering/Counter-terror financing (AML/CTF) deficiencies. The country has developed an action plan with the FATF to address the most serious deficiencies. The FATF welcomed Pakistan’s high level political commitment to their action plan.”

This would be Pakistan’s third stint on the unenviable grey list. The country made an appearance on the list in 2008 and 2012. It was last removed from the grey list in 2015. It is, therefore, a point for everyone to ponder why we keep returning to this list every three to four years. Is it because of lack of political will or the geo-political situation or a combination of both?

The country was always destined for FATF watch list or in watchdog’s technical lingo, become a ‘jurisdiction subject to monitoring’ after its last plenary held in Paris in February, where it had been decided that Pakistan would be placed on grey list from June. The enforcement of the decision was delayed till June only because FATF had bypassed its procedures to grey list Pakistan, which require negotiation of an action plan to address the identified deficiencies in counter-terrorism financing and anti-money laundering regimes of a country before announcing any decision about putting it on notice.

The four-month intervening period was, therefore, meant to complete the procedural requirements. But, owing to the lack of understanding of FATF procedures, some in Pakistan created false hopes about the caretaker government pulling off a miracle and somehow averting the predestined grey list. That was not the case and that did not happen.

Looking at things from the other side, a failure to negotiate the action plan could have led the country to FATF’s blacklist with graver consequences. Therefore, it was a sort of success for the interim government to have successfully concluded the negotiations. It should be recalled that the first National Security Committee meeting chaired by the caretaker Prime Minister Nasirul Mulk had ratified the action plan and extended government’s assurances that the corrective measures would be implemented. This means that while the matter has been a top priority for the incumbent set up, the former administration had also extensively worked on the plan.

There is also debate about the consequences of the development and how serious those could be. One thing is clear: there would be marginal increase in cost of doing business and ‘Letter of Credit’ related issues could be faced by the business community. Similarly, it is feared that it could worsen the foreign exchange rate situation, although this has not happened as yet. Fears or worries get accentuated because of the fragile state of economy, particularly the external account situation.


The Plan

The government has committed to taking number of steps to address international concerns about weakness in its financial system and, more importantly, the counter-terrorism financing and anti-money laundering regimes. A timeline has also been agreed.

The concerns, as I had mentioned in my earlier article in March, started with the alleged non-implementation of UN Security Council sanctions against Hafiz Saeed, his associates, and his organisations, the Jamaat-ud-Dawa (JuD) and Falah-e-Insaniat Foundation (FIF). But, later when the government moved to harmonise the UNSC and the national lists of proscribed entities and persons, the bar was further raised and fingers were also pointed at the integrity of Pakistan’s overall financial system, and the inadequate monitoring and regulatory mechanisms. Questions were asked about how come the country has a low conviction rate on unlawful transactions. Moreover, concerns were also expressed about cash couriers, who had been smuggling money across borders.

The government’s plan for getting out of FATF monitoring includes identification and assessment of risks; keeping law enforcement agencies updated about potential risks and the listed entities and persons; maintaining an up-to-date profile of proscribed individuals and entities; improving inter-agency and inter-provincial coordination on money laundering and terror financing risks; stronger prosecution of illicit financing cases to ensure that guilty gets punished; capacity building of banking officials; effective international cooperation; greater compliance with UN Security Council sanctions regime and tighter border controls for checking cash smuggling.

Pakistan has already come a long way in bettering its regulatory regimes, legal systems, and surveillance. The agreed steps would make it more difficult for terrorists to exploit the country’s financial system. But at the same time, the assertions that actions like the one taken by FATF had roots in geo-politics are not completely unfounded. These concerns have been expressed by Pakistan’s civilian and military leadership at the highest level. The National Security Committee, in its meeting held in January, had warned against “politicization” of the FATF process.

Therefore, while the government addresses the loopholes in its financial system, an effort should be made to deal with the problems at the political level, particularly those linked to US, Afghanistan and India. Foreign Office Spokesman Dr Muhammad Faisal conveniently refers all FATF related questions at his briefings to Finance Ministry, but diplomacy would, at some stage, have to play its role in resolving this issue, which essentially is a political one.

At the same time, the government has to look inwards also. At a time when it is committing to the world that it would become tougher with internationally proscribed entities and persons, some of whom are based here, recent developments have shown that it is getting lax towards local groups like ASWJ and its leaders. Many of them are being allowed to run elections under the cover of another name Rah-e-Haq, even though the National Action Plan explicitly disallows this. How would they be financing their campaigns? ASWJ Chief Ahmed Ludhyanvi has, moreover, been removed from Fourth Schedule, a domestic list. Candidates linked to Milli Muslim League, which has not been allowed to register with Election Commission for links with JuD/LeT/FIF are also in the run and openly flaunting their identity with Milli Muslim League.

If that is the commitment towards tackling the local groups and groups of international concerns, one can easily understand why we keep returning to the grey list every three years.

The writer is a freelance journalist based in Islamabad.


Twitter: @bokhari_mr