FATF team arrives in Pakistan

Pakistan has prepared 11 outcomes to comply with FATF recommendations, writes KK Shahid

FATF team arrives in Pakistan
After formally placing Pakistan on the grey list at a plenary meeting in Paris in June, a delegation of the counter-terror watchdog Financial Action Task Force’s Asia Pacific Group (FATF-APG) landed in Pakistan last Monday to monitor progress.

The FATF-APG delegation is checking arrangements Pakistan has put in place in the two months since an action plan was finalised.

With the caretaker government still in place and amidst delays in the new National Assembly taking oath and the formulation of the new Pakistan Tehrik-e-Insaf (PT) led government, Islamabad has struggled to prepare the report to be submitted to the FATF-APG delegation.

However, the final report submitted by Pakistan has underscored 11 outcomes to avoid further down-gradation to the black list.

The decision to put Pakistan on the terror watch-list was taken during the FATF meeting in February. This was done after the US had sought an unprecedented second vote, following which Islamabad was to draft a plan of action, as threat of being blacklisted loomed.
The former caretaker finance minister has said that the current banking mechanisms in the country are insufficient to curb terror financing

A major objection raised by the FATF against Islamabad in all the meetings is the presence of the groups affiliated with Hafiz Saeed, a globally designated terrorist. Ahead of the FATF meeting in February, Pakistan passed the Anti-Terrorism Ordinance, 2018 which meant that all UN designated groups were declared terrorists in Pakistan as well.

Follow up steps included the transfer of Falah-e-Insaniyat Foundation (FIF) run ambulances, closure of Jamaat-ud-Dawa’s (JuD) offices and transfer of the madrassa to the provincial governments.

“The questionnaire that was sent to us in April with regards to progress in the proposal that we were supposed to draft focused on entities affiliated with Hafiz Saeed,” said outgoing Finance Minister Miftah Ismail, who headed the Pakistani delegation during the February’s FATF meeting.

“After we filled the questionnaire, there was a meeting in Bangkok where our responses were discussed and a proposed plan of action given by the FATF. Then, with the caretaker government taking over, we coordinated with them with regards to the June meeting, where the final plan was agreed,” he added.

A prominent case that surfaced regarding Pakistan’s failure to curb counter-terror funding was when Habib Bank Limited was asked to leave the US, and fined $225 million last year. The US Department of Financial Services claimed there were flaws in HBL’s systems which “opened the door to the financing of terror” and that the bank had not taken the necessary corrective measures. HBL’s transactions with al-Qaeda-linked Saudi bank Al Rajhi also came under scrutiny.

Former caretaker finance minister Salman Shah says the current banking mechanisms in place in the country are insufficient to curb terror financing.

“[In HBL’s case] the payments originating in Saudi Arabia went to Pakistan, but were never properly documented,” he said. “The flaws in the banking mechanism are exploited by terror groups, money-launderers and smugglers, which is one of the reasons why the FATF grey-listed Pakistan.”

“In addition to the actions against terror groups, Pakistan would have to fix its banking system so that the undocumented transactions and money laundering can be stopped.”

However, Miftah Ismail says the HBL case has “nothing to do” with the FATF grey-listing.

“The action against HBL wasn’t taken by the US government, it was taken by the New York state government. There was an issue regarding compliance, and the bank itself – God forbid – was not involved in any kind of laundering or any other such activity.”

Government officials say that in a bid to address the FATF’s concerns, the reporting mechanism has been improved with the working of National Counter Terrorism Authority (NACTA) streamlined as well.

Muhammad Amir Rana, director of Pak Institute for Peace Studies (PIPS) and author of The Militant: Development of a Jihadi Character in Pakistan, says NACTA’s collaboration with the Federal Investigation Agency can help Pakistan’s counter-terror fight.

“The FIA and NACTA are collaborating on a task force which will counter the financing of these groups,” he says.

Pakistan was last placed on the grey-list between 2012 and 2015, with Islamabad removed from it after the National Action Plan was passed.

“The regime at that time wasn’t as strict as it is right now. It was following the APS attack that Pakistan made the National Action Plan, which was taken as an example of the state’s will to counter terror financing,” says Rana, adding that as long as militant groups continued to openly work in the country, Pakistan would continue to be scrutinised by counter-terror watchdogs.

“JuD candidates participated in the elections, and those affiliated with these groups are openly giving speeches and holding rallies,” he says. “Of course, there are many things that have not been in the civilian government’s control on this front. But now the civilians have to take a stand. They need to take the decision making and policymaking under their own control.”