FATF unfairness

Published March 7, 2022

IT is no surprise that the FATF, the global money laundering and terrorist financing watchdog, has retained Pakistan on its so-called grey list of countries under increased monitoring until June. This is in spite of the significant progress made by Pakistan in completing the required actions and Islamabad’s political commitment to implementing a comprehensive action plan as acknowledged by the FATF over the last couple of years.

Pakistan was put on the grey list in June 2018 and has since completely or largely addressed 32 out of 34 action points. The watchdog “encouraged Pakistan to continue to make progress to address the remaining items as soon as possible by continuing to demonstrate that it is enhancing the impact of sanctions by nominating individuals and entities for UN designation and restraining and confiscating proceeds of crime in line with its risk profile”.

Energy Minister Hammad Azhar, who is heading Pakistan’s efforts to exit the list, said on Saturday that Pakistan’s effort to complete the FATF’s technical requirements would be acknowledged ‘soon’.

However, Pakistan’s engagement with the task force is not new. It was placed on the list of jurisdictions under increased monitoring in 2008 and from 2012 to 2015. It is a well-known fact that the watchdog has let many countries off the hook, even though they had done far less to reform their AML/CFT regimes than Pakistan.

Yet Islamabad is being asked for total compliance with the action plan. Chances are that the FATF may keep the country under increased monitoring even beyond June on one pretext or another. There are at least two possible explanations for that.

One, Pakistan’s compliance on the technical side may have significantly improved but its effectiveness is still ranked as poor by the FATF as is evident from the consolidated ranking assigned to the country based on the third follow-up report released last month. Two, Islamabad’s growing tilt towards China — and recently Russia — is widening the gulf between the country and the West, including the US, allowing India to influence FATF decisions on Pakistan. That completing all actions for effectiveness of the AML/CFT regime is a structural benchmark of the IMF deal underlines Pakistan’s weakening clout in Western capitals.

The government must address the remaining two points of the action plan without further delay. But it also needs to ramp up diplomatic efforts for mustering greater support for its endeavours to restructure its AML/CFT regime and exit the grey list.

Published in Dawn, March 7th, 2022

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