Pakistan looks set to beat terror-funding blacklist again, with some help from China

The Print
October 16, 2019
NAYANIMA BASU

Pakistan may continue to remain in the ‘grey’ list of the Financial Action Task Force (FATF) for yet another year as the Paris-based terror-funding watchdog might let it off the hook with a stern warning at its plenary, which begins Wednesday and ends Friday.

The reasons are manifold.

Ever since Pakistan Prime Minister Imran Khan assumed office last year, Islamabad has not left any stone unturned in lobbying hard with international powers, right from the US to China, to get off the grey list.

Pakistan was put on the grey list in June last year for its failure to curb terror financing and money laundering. 

The grey list is one step away from being blacklisted, which can wreak havoc on Pakistan’s already fragile economy.

Being on the blacklist will impact Pakistan’s ability to do business with other countries, diminish its ability to borrow from multilateral institutions like the International Monetary Fund (IMF), and hurt the country’s exports.

Even at the last two plenaries of the FATF in February and June, Pakistan was let off with warnings and an action plan on how it should curb terror financing.

Pakistan’s diplomatic outreach

Prime Minister Khan has said several times, including at his UN General Assembly address in September, that India is pushing for Pakistan to be blacklisted in order to “bankrupt” the country.

Earlier this month, just days before the FATF plenary, Khan visited China where he met the country’s entire leadership in Beijing. According to sources, during talks, he also presented Pakistan’s case on why it should not be blacklisted.

Interestingly, this is the first plenary of the FATF since a Chinese president took helm at the watchdog. 

After the previous plenary in June, Xiangmin Liu, who serves as director-general of the legal department at People’s Bank of China, Beijing’s central bank, assumed office as FATF president, a post with a year’s tenure.

Khan had also raised Pakistan’s efforts to get off the FATF grey list when he visited the US last month for the UN General Assembly.

“In recent months, Pakistan has moved decisively to make arrests of many militants and shut down their facilities. This may be enough to keep Pakistan off the blacklist, but not enough to get it off the grey list,” said Michael Kugelman, deputy director of the Asia programme and senior associate for South Asia at the Washington-based think-tank Wilson Center.

Kugelman added that until Pakistan severs all ties with terrorists and eliminates their financial networks, it will be hard for Islamabad to be cleared by the FATF.

“In effect, until Pakistan takes complete and irreversible steps against terrorist financing, it will remain vulnerable to FATF sanctions,” he said.

The 41-member Asia Pacific Group (APG), a regional affiliate of the FATF, downgraded Pakistan to the ‘Enhanced Follow-Up’ category in its Mutual Evaluation Report (MER) in August. The report will be considered at the FATF plenary.

As a result, Pakistan is now required to submit quarterly progress reports, instead of biannual, to the APG, starting 1 February 2020, to show improvements in its technical standards to check money laundering and terror financing.

What Pakistan needs

To stay off the blacklist, Pakistan will need a minimum of three votes at the FATF plenary, which it will be able to obtain from China, Malaysia and Turkey, sources told ThePrint.

These are the countries that have lambasted India for scrapping Article 370 and 35A and changing status quo in Jammu & Kashmir, which is now two union territories without the autonomy and privileges the region enjoyed until 5 August this year.

However, sources said it will be difficult for Pakistan to move out of the grey list because it would need about 15 votes for that.

“During the recent visit of the Pakistan army chief and Prime Minister to China, probably FATF was discussed. Pakistan has not taken the necessary steps to solve the militancy problem,” said Pakistan expert and commentator Ayesha Siddiqa.

“Besides the arrests, nothing has been done to proceed further on the militant leadership. However, there are stricter laws instituted on money laundering, which is all that Pakistan will offer to the FATF team,” Siddiqa added.

India’s isolated at the FATF?

India, which has been making efforts to isolate Pakistan at the FATF, has lost influence with some countries on account of its decision on Kashmir, sources said. Apart from Turkey and Malaysia, the move could also cost India the support of the US to some extent.

The US has said it has taken note of the terrorists Pakistan has arrested of late.

“We’re continuing to welcome Pakistan Prime Minister Khan’s commitment to prevent cross-border terrorism and to fulfil Pakistan’s stated commitment to combat militant and terrorist groups without distinction,” Alice Wells, the Acting Assistant Secretary of State for South and Central Asia, said at a media briefing on the sidelines of the UNGA last month.

Siddiqa, a research associate at the School of Oriental and African Studies, London, said Pakistan could not be isolated entirely as it is “willing to play a role in the Middle East and Afghanistan”.

“I am not sure if India is isolated but its pressure has its limitations,” she added. 

“Islamabad has its allies within the FATF, including at the very top as China currently holds the presidency,” said Kugelman. “Pakistan’s friends can push back against the likes of India and make a case in Pakistan’s favour to other members.” 

Reference: https://theprint.in/diplomacy/pakistan-looks-set-to-beat-terror-funding-blacklist-again-with-some-help-from-china/306263/