Pakistan put on terrorist financing watchlist

ISLAMABAD: A global money-laundering watchdog has placed Pakistan back on its terrorist financing watchlist, media reports and a diplomatic source said on Friday, in a likely blow to both Pakistan's economy and its strained relations with the United States.

The move is part of a broader US strategy to pressure Pakistan to cut alleged links to Islamist militants waging chaos in neighbouring Afghanistan.

It comes days after reports that Pakistan had been given a three-month reprieve before being placed on the list, which could hamper banking and hurt foreign investment.

Washington has spent the past week lobbying member countries of the Financial Action Task Force (FATF) to place Pakistan on the so-called "grey list" of nations that are not doing enough to combat terrorism financing.

Pakistan's last-minute efforts to avoid being placed on the list, which included taking over bodies linked to a powerful Islamist figure, proved insufficient, Times Now television channel said.

An official statement was expected later on Friday. Pakistan was previously on the list for three years until 2015.

A non-Indian diplomatic source from one of the FATF countries confirmed that the group had decided Pakistan would be put back on the watchlist.

Earlier in the week China, Turkey, and the Gulf Cooperation Council (GCC) were opposing the US-led move against Pakistan but by Thursday night both China and the GCC dropped their opposition, the diplomatic source said.

"The decision was taken yesterday," the diplomat said.

He added that the financial consequences would not kick in until June, which, in theory, could allow Pakistan the wriggle room to fix the terrorist financing issues. "But the odds of that, particularly in an election year, seem slim," he added.

Pakistani officials and analysts fear being on the FATF watchlist could endanger its handful of remaining banking links to the outside world, causing real financial pain to the economy just as a general election looms in the summer.

Under FATF rules one country's opposition is not enough to prevent a motion from being successful. Britain, France and Germany backed the U.S. move.

Islamabad has sought to head off the move by amending its anti-terrorism laws and by taking over organizations controlled by Hafiz Saeed, a Pakistan-based Islamist whom Washington blames for the 2008 Mumbai attacks that killed 166 people.

On Tuesday, Foreign Minister Khawaja Asif tweeted that Pakistan had received a 3-month reprieve, adding that it was "grateful to friends who helped".