India’s FATF influence: Pakistan considers approaching authority for ‘appropriate action’

Pakistan is considering approaching the FATF president for an appropriate action following the recent confession by the Indian government, the Ministry of Foreign Affairs said in a statement on Monday.

“India’s credentials for assessing Pakistan in FATF as co-chair of the Joint Group or for that matter any other country are subject to questions, which we urge FATF to look into.”

Indian Minister for External Affairs S Jaishankar had reportedly claimed that Pakistan is on the grey list due to India’s influence in the FATF. “Due to us, Pakistan is under the lens of FATF and it was kept in the grey list. We have been successful in pressurising Pakistan and the fact that Pakistan’s behaviour has changed is because of pressure put by India by various measures,” said Jaishankar according to Hindustan Times.

“The Indian statement not only exposes its true colors but also vindicates Pakistan’s longstanding stance on India’s negative role in FATF,” Pakistan said.

The FO said Pakistan has always highlighted to the international community the politicisation of FATF and undermining of its processes by India. “The recent Indian statement is just further corroboration of its continued efforts to use an important technical forum for its narrow political designs against Pakistan,” the statement read.

The FO said India has “left no stone unturned” in casting doubts on Pakistan’s progress in constructively engaging with FATF during the implementation of the action plan.

The FO claimed Pakistan’s immense progress in Anti-Money Laundering/Combatting the Financing of Terrorism domain demonstrated through concrete, tangible and verifiable actions has been openly acknowledged by FATF. “India’s delusions of putting pressure on Pakistan have always remained unfulfilled and would never see the light of day.”

Pakistan’s progress with FATF

The FATF decided to keep Pakistan on its grey list last month while recognising the country’s efforts and progress in combatting terror financing.

“The Pakistani government has made substantial progress in making its counter-terrorist financing systems stronger and more effective. It has largely addressed 26 out of 27 items on the action plan it first committed to in June 2018,” the forum’s president, Dr Marcus Pleyer said in a press conference.

Pakistan will remain under “increased monitoring”.

Highlighting a key item that the country needs to meet is the investigation and punishment of senior leaders and commanders of terror organisations.

As compared to 2019, Pakistan has made substantial improvement in countering terrorist financing and money laundering, Dr Pleyer added.

“Pakistan is still failing to effectively implement the global FATF standards across a number of areas. This means the risks of money laundering remain high which in turn can fuel corruption and organised crime.”

The forum insisted on ensuring the implementation of the United Nations Resolution 1373 and tracking of assets of elements involved in money laundering.

What is FATF?

The FATF is an inter-governmental body that combats threats to the international financial system. A potential downgrade to the FATF blacklist has serious implications for Pakistan.

Being on the blacklist means the country’s banking system will be regarded as one with poor controls over Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT).

FATF doesn’t impose any sanctions directly, but its guidelines are taken seriously by global financial institutions. This means overseas Pakistanis who send remittances to Pakistan will be subject to more scrutiny. The traders who deal in imports and exports will suffer because they have to make and receive payments with the help of international banks that may either increase the cost for Pakistani banks or simply not do business with them.

The implications for the economy as a whole can be far more serious. Being placed on FATF’s blacklist can affect capital inflows and lower investment in Pakistan, thus hurting the ongoing IMF programme. Raising funds from global capital markets will be difficult, which will undermine the country’s ability to pay foreign debt.

In February 2020, the FATF expressed concerns over “Pakistan’s failure to complete its action plan in line with the agreed timelines and in light of the Terrorist Financing risks emanating from the jurisdiction,” it said in a report.

The global watchdog for illicit financial activities had put Pakistan on its grey list in June 2018 because of weaknesses in the country’s AML and CFT regimes.

The grey list refers to countries or jurisdictions under increased monitoring because of strategic AML and CFT deficiencies. After being placed on the grey list, Pakistan had developed an action plan with the FATF to address those deficiencies, but fell short of targets.

The deadline was initially June 2020. But it was first extended to September 2020, then to February 2021, then June, and now to its next session.