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Pakistan On The Edge: FATF

 

A Stern Warning

In a major development last week, the terror financing watchdog Financial Action Task Force (FATF) gave a stern warning to Pakistan and decided that the country will remain on its grey list till February 2020 and directed them to take “tangible measures” for the “absolute compliance” of all its recommendations to check terror financing and money laundering.

A strongly worded warning issued by the president of the body has given Pakistan until February 2020 to complete its full action plan. The country was under the “enhanced monitoring process” as stated by Mr.Xiangmin Liu, President of FATF. Effectively, this gives Pakistan four months to get its act together – after which there won’t be any more attempts to wriggle out of being blacklisted.

Progress So Far

The FATF Plenary noted that Pakistan addressed only five out of the 27 tasks given to it in controlling funding to terror groups like the Lashkar-e-Taiba and Jaish-e-Mohammad, responsible for series of attacks in India. Pakistan was largely compliant on only nine of the FATF’s 40 recommendations. It was partially compliant on 26 and non-compliant on four.  Pakistan’s performance metrics on curbing terrorist finance show that it needs to do more.

No Funds For Future

It should be noted that if the cash-strapped nation continues to remain in the grey list, it would become very difficult for the Imran Khan government to get financial aid from global money lenders, including the International Monetary Fund (IMF) and World Bank, further making a more precarious situation for its plunging economy. By making its warning to Pakistan public,  the FATF has given notice to the global financial institutions that they need to prepare to red flag the jurisdiction and ready their systems for the eventuality in February 2020.

Way Ahead For Pakistan

Although the FATF is currently headed by China who is an all-weather ally of Pakistan still the evidence against Pakistan is so strong that even China couldn’t save it from remaining in the ‘Grey List’ .Chances of Pakistan exiting the Grey List in the next few years are now reduced to nil. The possibility of a formal Black Listing in February 2020 is now highly probable. The moment a nation gets put in the Black List, it invites immediate economic sanctions and punishment – borrowing will become difficult, non-banking financial institutions will come under financial scrutiny and bailouts and IMF packages will become harder to access. Only two countries, North Korea and Iran, are on the FATF blacklist, which severely crimps their access to the global financial system as well as international aid.

Viewpoint

No doubt this was received as good news in Pakistan, and the country was quick to celebrate by expressing themselves on all kinds of social media platforms, declaring it as a victory, they should not forget that this happiness could be short-lived. The stern warning the country has received cannot be pushed aside so easily. While Pakistan was able to receive the backing of important allies such as Turkey and Malaysia, there is little doubt that the country is still not out of danger. With Pakistan already boycotted by the US who have already withdrawn all financial support from the country and the IMF already denying further loans to the country, the chances of survival of Pakistan’s economy seems bleak. If the country has not gotten close to fulfilling the FATF requirements in two years, one can only imagine how much progress it can show in the next four months. This goes to show how serious it is in terms of taking action on terrorist finance and money laundering.

21 Oct 2019/Monday                                               Written by: Saima Ebrahim

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