FATF decision

Published May 20, 2018

AS the country’s leadership gears up for a transfer of power to an interim government, and the start of a bitter election cycle, a crucial decision is waiting in the wings.

In June, the Financial Action Task Force is set to place Pakistan on its ‘grey list’ of jurisdictions whose financial systems present risks of money laundering and terrorist financing to the world.

This will not be the first time Pakistan finds itself on this list, having spent three years on it between 2012 and 2015.

But the return to that position this time comes in the context of fraying ties between Pakistan and the global community, particularly the United States, and many people (including our current finance minister) have cast a question mark over the credibility of FATF’s move, particularly its timing.

It appears that a technocratic global body tasked with creating and monitoring a legal and regulatory framework to exclude the proceeds of crime, tax-evaded wealth and terrorist funding from the global financial system, is being used to advance purposes other than its stated one.

The specific circumstances under which Pakistan found itself on course to being grey-listed by June lend some credence to this perception. The decision was made in February in an extraordinary session of the global body’s meeting that looked strangely like an ambush.

The timing placed a government, in the closing days of its tenure, in a position where it would have to navigate a complex maze of demands to create an ‘action plan’ to pave the way for the country’s exit from the grey-list designation.

Thanks to the opacity of FATF’s operations, it is uncertain what exactly Pakistan is expected to do, but what is clear is that the government has taken some steps to come into compliance with the global body’s requirements, such as proscribing key groups, whose open operations were a bone of contention, and seizing their assets.

Keeping in mind the opacity of the process, as well as the election-related timelines against which the government has had to struggle in drawing up an action plan, it is fair and just to expect FATF to postpone the grey-listing till its next meeting in November.

Pressing on in June will place an interim government in a position it is not empowered to operate in, thereby fuelling the perception that the FATF process is driven by great power grievances against the country, and that have little to do with the legal and regulatory framework of Pakistan’s financial system.

A new government would be in place by the time of the next meeting; it would have a fresh mandate and would have had enough time in office to absorb the full implications of grey-listing. That would be the right time to press for an action plan and start the clock.

Published in Dawn, May 20th, 2018

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