Being on the FATF grey list is posing further problems to Pakistan’s economic future.
The Financial Action Task Force (FATF) has officially put Pakistan on its ‘grey list’ with a hope that it would enforce its plan to tighten its anti-terror financing laws in coming months to get off the list. The country runs the risk of landing in the FATF’s blacklist if fails to enforce the plan of action.
According to the FATF, the Pakistani delegation at the Paris meeting made a “high level political commitment” to strengthen its anti-money laundering and anti-terror financing laws and to address its strategic counter terrorist financing-related deficiencies.
The task force has listed out eight objectives for Islamabad to achieve through its strong anti-terror financing and anti-money laundering laws in the stipulated time.
The move does not entail any immediate financial implication for the country but it does hurt the international image of the country.
Though Pakistan has been on the grey list for a long period earlier, in view of the current precarious economic situation of the country, the FATF decision could be problematic for dealings with the international financial institutions as well as with the international banking system.
Though unprecedented US pressure, on India’s prodding, is described as the main reason behind the official placing of Pakistan on the grey list, the move has emerged as the first challenge for the government to be elected after July 25 vote on the diplomatic front to get Pakistan off this list as soon as possible.
The decision came at a bad time when Pakistan is weighing the option to go to the International Monetary Fund (IMF) to seek a bailout package for averting a possible balance of payment crisis.
There are fears that Pakistan could face a daunting task to get the IMF package on some favourable terms in view of the dominant role of the United States at the global financial institution.
With the country’s foreign exchange reserves hovering around ten billion dollars – hardly enough for the payment of imports for a month and so – and with huge payments due in coming months for foreign loans, the government has very limited options to deal with the situation.
The previous government made some arrangements from China which deferred the crisis for a while, but the issue could not be addressed through such stopgap arrangements any longer.
It has become imperative for the Pakistani leadership, both political and
military, to sit together and carve out a plan of action to address this challenge to the satisfaction of the international community without compromising national security.
It would be wrong to say that Pakistan has done nothing to curb terror financing and money laundering that is used to finance terror activities.
Since becoming an ally of the United States in its war against terror following 9/11, Pakistan took a number of steps to crackdown on transfer of money through Hawala and Hundi – the major sources of funding for the terrorists.
In May, the Securities and Exchange Commission of Pakistan issued Anti-Money Laundering and Counter Financing of Terrorism Regulations in line with the FATF recommendations.
The new regulations, superseding all previous laws, club together all anti-money laundering and anti-terror financing laws.
Criminals often set up companies and firms in the name of fake people or in the name of other persons and then use these firms for money laundering and terror financing, all the while showing them as normal business transactions.
But under the new SECP regulations, the financial institutions are required to identify the ultimate beneficial owners as well as all legal persons and arrangements related to companies and firms, so now the criminals cannot hide their identity.
Earlier this year, the State Bank of Pakistan also instructed all foreign exchange companies to firmly comply with the anti-money laundering regulations to avoid any punitive action.
Previously, the central bank had cancelled licenses of many foreign exchange companies found negligent in complying with the anti-money laundering laws.
While the FATF’s latest action might be politically-motivated given the arm-twisting tactics used by the United States in international affairs since Donald Trump became president, we need continuous introspection for the sake of our own interests to keep our house in order.
When personalities linked to groups which we have put on terror lists roam freely around the country, propagating their agenda, then it does raise concern and fear not just inside the country, but it does raise eye-brows in the outside world too.
Coincidently, the FATF decision came just close to the controversial lifting of travel and financial restrictions on Maulana Ahmed Ludhianvi, the leader of the defunct Ahle Sunnat Wal Jamaat (ASWJ).
Such controversial moves overshadow the well-meaning efforts to curb militant activities and give an excuse to India as well as other countries to malign our commitment to combat terrorism.
The Pakistani nation as well as its valiant security forces, have undoubtedly given numerous sacrifices in their fight against terrorism and the world needs to recognise these sacrifices as they also played a major role in making the world safer.
After FATF placement of Pakistan on the grey list, the Chinese government has very rightfully urged the international community to fully recognise and trust Pakistan’s great efforts and sacrifices in the fight against terrorism.
“I would like to reiterate that the international community should treat Pakistan’s efforts objectively and fairly, and give more recognition and support to the Pakistani side for more real and effective international counter-terrorism cooperation,” says Chinese Foreign Ministry spokesman Lu Kang.
The next government needs to launch a robust diplomatic effort to enlist support from other influential countries and blocs like Russia and European Union for its endeavours to combat terrorism and at the same time should not let its achievements at this front go waste at home.
Pakistan will have to tread a tightrope in the coming months to meet the dual challenges at the diplomatic and economic fronts.
While it has to actively engage the world community to address its economic woes, it has to remove international concerns related to terrorism without compromising its vital security and national interests.
With elections just around the corner, the political leaders of the country instead of relying on populist slogans and rhetoric need to rise to the occasion and give a serious thought to the real challenges faced by the country.