The wait is over, and the results are out. Pakistan will be retaining its spot on the grey list until the next evaluation in February 2021. Pakistan was put on the list of jurisdictions as a result of a motion passed by the US and backed by India in 2018. Their claim was Pakistan’s support to terror financing or failure to take action against such financing. And as a consequence of that motion, Pakistan was put on the grey list by Financial Action Task Force FATF. Pakistan settled to implement ten points agenda to get off the strategic issues related to Anti-Money Laundering and Combating the financing of terrorism (AML-CFT). Pakistan has made efforts to get off the list but has made significantly less progress. There are numerous reasons for this; for example, lack of technical expertise and proper training of law enforcers. With support from the international community and its own dire efforts, Pakistan will be able to get itself off the hook.
During the previous grace period, to pull itself out of the grey list, Pakistan went into overdrive. It drafted laws and enacted various regulations to implement FATF recommendations. It has worked extensively to upgrade its laws to match those of the international level. Furthermore, it has arrested terrorists and put some of their organizations in the fourth schedule of Pakistan’s constitution.
Later in October 2020, watchdog rated these efforts, and ironically Pakistan was rated poorly in the technical compliance and effectiveness section. Pakistan has worked on the twenty recommendations and yet to work on the remaining six. Therefore, the group gives time to work on those recommendations till February next year. FATF also wants Pakistan to implement UN resolutions 1267 and 1373 majorly related sanctioning and criminalizing terror financing and their money transfer passages. Unfortunately, the comparison of the Mutual evaluation report of 2019 and the follow-up report shows no significant difference, highlighting the failure on the part of Pakistan.
Suppose Pakistan couldn’t improve the position and couldn’t convince FATF. In that case, it might be pushed into ‘blacklist.’ This will bring grave consequences for Pakistan’s economy and may subsequently lead towards political instability. Also, its major transactions will be monitored, economic sanctions will be employed over Pakistan, and prohibited measures will be taken against it. It is not only Pakistan who is going to suffer if blacklisted, but the entire region is also going to be affected. If Pakistan melts down economically, there will be mushroom growth of terrorist outfits, and there will be unrest in the whole region. A most crucial aspect of this is that the troubles of India in Kashmir will be mounted. Therefore, India should think through its policy of economically bleeding its neighbor- as it is working on a rigorous diplomatic campaign to get Pakistan blacklist.
But why has Pakistan failed to get itself out of the grey list? One of the reasons is that civilian and military were not on the page regarding this issue. But now, the incumbent government and military leadership see eye to eye on the respective matter. Even now, more collaboration is needed by both of them.
The other issue is Pakistan’s primitive and old approach to satisfy the world with its narrative. Pakistan’s measures to deal with terror financing are not convincing enough for the international community that it has got itself break free of them.
Moreover, there is no mechanism to implement given recommendations- everything is on paper. Law enforcement personnel have little to no training to identify and prosecute financial crimes. Meanwhile, a major part of the Pakistan economy is the shadow economy.
Although it has arrested some terrorists, legal proceedings yet remain. This delay brings uncertainty to mind the international community- Pakistan is trying to sleep on the issue.
Apart from all this, India is vying utmost to push Pakistan to the blacklist to corroborate its claim– Pakistan is an irresponsible and terror-sponsoring state.
There is political commitment to plug in the loopholes in the measures to eradicate terror financing. Now it’s time for action. Pakistan needs to show the world it is making adequate progress on the enforcement part and is not beating about the bush.
However, the world must know that Pakistan is a developing state marred by several other issues. It doesn’t have the resources and technical expertise to deal with this matter. Therefore, international watchdog must provide its support in this regard.
Succinctly, it can be said the international financial watchdog has given Pakistan a grace period. It might be its last chance to prove its seriousness to implement FATF recommendations. It has to uplift its efforts to get clean of the terror financing charges against it. In other case, it would have to face some severe consequences. The previous efforts by Pakistan show its willingness and eagerness to escape the list. One should hope for the best. It has three months to accelerate its efforts. Hence, the actual test starts now.