WHILE the Pakistani establishment might have exhaled after five days of intense proceedings at the Paris plenary of the Financial Action Task Force (FATF), the sword continues to hang as the breather is only till February 2020. If Pakistan continues to believe that it can get away with bluff, the FATF has indicated the world’s patience might be running dry. Despite public commitment from the highest levels of its government, of the 27 action points, compliance of which would block the terror-supporting ecosystem within its territory, Pakistan could address only five as per an FATF statement released after the proceedings in Paris today. Those too only partially and not in good measure.
To understand how close it came to getting blacklisted look at the language used by the watchdog: “All deadlines in the action plan have now expired…the FATF will take action, which could include the FATF calling on its members and urging all jurisdictions to advise their FIs to give special attention to business relations and transactions with Pakistan.” Now read the language used for Iran, a blacklisted country: “The FATF, therefore, calls on its members and urges all jurisdictions to continue to advise their financial institutions to apply enhanced due diligence with respect to business relationships and transactions with natural and legal persons from Iran.” Could you spot the difference? It's only of active and passive voice!
The statement gives a clear picture of the hollowness of Pakistani commitment to act. For example, it asks Pakistan “to demonstrate its proper understanding of terror financing risks,” meaning the establishment in Islamabad does not show required levels of appreciation of the scale of the problem they have. Going through the section on Pakistan and reading between the lines, one gets a sense that FATF is convinced that the Pakistani authorities have not been fully cooperating with the laid down procedures to clamp down on terror financing. Law enforcement agencies are still dithering from acting against designated individuals and organisations fomenting terrorism. Adequate support to the judiciary to prosecute those involved in terror financing activities is missing. FATF also found that even those designated as terrorists by the United Nations are not facing any serious restrictions in terms of resources.
The FATF has ultimately expressed serious concerns with the overall lack of progress by Pakistan to address terror financing risks from its soil, as also its failure to deliver on its action plan in line with agreed timelines. Given all this happened under Chinese presidency of the proceedings shows how serious the situation is. While the grey-list status already puts many restrictions on Pakistan’s capacity to engage with the world on matters of trade and finance, even the suggestion that Pakistan could face a sanctions regime going forward could already be constraining its creditworthiness. Last one year has seen a limited set of creditors bailing out Pakistan’s struggling economy from Saudi Arabia to China. The IMF package was already in negotiations at the time of Pakistan’s greylisting in June 2018, and yet has come with added costs.
Like always, Pakistan negotiated with a gun to its own head to prevent the humiliation of getting blacklisted at Paris: don’t push us beyond this because a failed nuclear weapons state with a fragile internal security situation could be a greater disaster. Within this framework, an unequivocal message to Pakistan from Paris is: act before all windows close. For India, it should be a matter of satisfaction that the world has started seeing Pakistan with concern. In a tactical move, the Indian delegation kept a low profile, and South Block has maintained complete silence, blunting Pakistani charge of Indian schadenfreude.