Pakistan to Reappear on FATF Watch-List

In the previous article “Terrorism, Ghazwa-e-Hind and Pakistan”, the author had briefly referred to the recent US initiatives as punitive measures to dissuade Pakistan indulging in terrorist activities in its neighbourhood countries, mainly Afghanistan and India. So far Pakistan has been diffident by vehemently denying US charges of their involvement in Afghanistan and India. In fact, they reacted angrily to US punitive measures perhaps due to the confidence that financial loss from that country could be easily be offset through China and Islamic countries like Saudi Arabia. But at the same time, they appeared to be little weary of being added to the list of countries deemed non-compliant with terrorist financing regulations by the Financial Action Task Force (FATF), a relatively tough measure that the Pakistan establishment fear could hurt its economy in the long run.

The FATF is an intergovernmental body based in Paris which sets global standards for fighting illicit finance. Pakistan feared that a motion already moved by the US with active support of UK, France and Germany, if endorsed by FATF, may badly affect its reputation as well as economy as it will be for the second time for Pakistan to be put under the notorious list. What really appears to worry Pakistan is that being put on the watch-list again might serve as a red flag for the foreign investors and companies to do business in their country and hinder the country’s access to international markets as it is due to repay roughly $3 billion in debt in the coming months. Besides, US may also pressurise world institutions like International Monetary Fund and World Bank to put forth stricter terms for Pakistan.

Pakistan’s worst fear came true when despite their active lobbying and last ditch efforts, during a plenary session of the FATF meet on 23rd February 2018 in Paris, it was decided that Pakistan should be put on the "grey list" again to keep a watch on the rogue nation for not complying with the norms to check financing of terrorism. It has, however, been given time till June 2018 to decisively act against the terror groups operating from its soil before it is formally placed under “direct ICRG reporting” whereby it will face greater international scrutiny making it difficult to access overseas funding which might severely hit its already ailing economy in an election year. The decision was a victory for the US, UK, France and Germany, which had co-sponsored the move in January alleging that Pakistan’s promises against fighting terrorism, remained only on paper while terror groups continued to flourish in the country. FATF Move is not a Surprise on Pakistan

The FATF Move is not a Surprise for Pakistan.

Earlier, the FATF had cautioned Pakistan in February 2017 and then again in November 2017 during its International Cooperation Review meetings about its continued support to terror groups like Lashkar-e-Taiba (LeT), Jaish-e-Muhammad (JeM) and Jamat-ud-Dawa (JuD). Apparently these warnings fell under the deaf ears with their earlier experience with the stated “Grey List”. Going by the response of Pakistani ministers, one would surmise if Pakistan really cared or had any regard for the opinion of the international community. One Pakistani minister reacted to the FATF warning by saying that Pakistan had been on the FATF watch-list till 2015 and despite that its economy grew with normal pace. Another minister boasted that Pakistan had taken several steps for checking terror financing and was actually winning the war against terrorism. Some politicians and analysts in Pakistan even interpret the three-month respite given by the FATF till June as their victory.

It is true that after the Peshawar school massacre in 2014 in which the terrorists belonging to the Tehrik-i-Taliban (TTP) killed 149 civilians, mostly children, the armed forces and other law-enforcing agencies actually undertook massive operations against the terrorist groups but, once again, it was selective and limited to only certain groups. It has been long alleged that Pakistan has the concept of ‘Good Militants’ and ‘Bad Militants’, the former are ones which act against the interests of Afghanistan and India while the latter groups hit Pakistani interests. While Pakistan is tough in its action against the alleged bad militants, its military and political establishment actually keep their eyes shut on the activities of other terror groups and, in fact, abets and endorses their activities often citing it as freedom movement.

Thus Pakistani operations against the terror groups have largely been selective and only a small fraction of the definitive solution to liquidate the existential threat faced by the terrorism scourge. The Anti-Extremism bill is stuck in the National Assembly in Pakistan since long apparently due to the lack of will as also the power struggle between the defence and interior ministries as to which should ultimately be in charge of its implementation. Similarly, the National Action Plan (NAP) made after the Peshawar army school massacre remains mostly inoperative as out of its twenty points unanimously endorsed by all political parties, only two points relating to military action have been partly implemented. The remaining points which relate to legislation, governance, madrassa regulation and financial oversight (on which the FATF has acted against Pakistan), have almost lost oversight fettering in oblivion.

A recent scandalous revelation by the authorities in US in the context of Pakistan’s premier Habib Bank Limited (HBL) gave another reasonable ground for the US to decisively act against Pakistan. During the last week of August 2017, an embarrassing financial shock hit Pakistan’s premier bank’s New York branch. The US authorities caught the HBL branch for money laundering to an alleged “good guys” list which included identified terrorists, illicit arms dealers, Iranian oil shippers and a money transaction business with Saudi Arabia’s private Al Rajhi Bank, which had dealings with al-Qaeda affiliates. The truly disturbing and disappointing was the HBL’s failure to adequately identify, as per law, the Saudi bank’s politically exposed customers belonging to Pakistan’s dynastic ruling family. Consequently, the HBL had to close its US operations and pay a fine of $225 million (negotiated downwards from an initial $630 million).

Pakistan peculiarly follows an ostrich like approach of not looking or addressing the actual threat, hoping it will as such go away. Even in the current spell of political and diplomatic manoeuvres when faced with the risk of being put on the FATF list, instead of addressing the cause itself they were relying more on their allies like China, Saudi Arabia and Turkey to come for their rescue in dousing the fire as was apparent from the boastful utterances of some Pakistani ministers. Of course, Pakistan’s friends have not been able to do much this time to prevent their listing under FATF in view of enough evidence available against the consistently defaulting country.

Last time, Pakistan had been placed on the FATF watch list from 2012 to 2015 mainly due to its failure to pass the Anti-Money Laundering and Countering Financing of Terrorism Act. In 2015, Pakistan passed the stated law and was removed from the FATF list. However, any substantive and cognizable action was not taken against the groups and individuals designated as terrorists by the United Nations (UN). It is of common knowledge now that nothing has been done in Pakistan to apprehend or curtail the activities of the UN-designated terrorists and financing entities like LeT, JeM, JUD, Hafiz Saeed and associated financial ‘charities’. Thus inadequate and half-hearted measures taken by Pakistan made sufficient ground for the US and allies to press the FATF to put Pakistan on the watch list.

Why Did China Pull Support?

Historically, China has been maintaining that Pakistan has made several sacrifices in their fight against the terrorism and vehemently opposing any move internationally that could isolate Pakistan on the issue of terrorism. It has even repeatedly blocked the US sponsored initiative in the Security Council to declare JeM Chief Azhar Masood as the global terrorist. But strangely enough in the instant case, China and Islamic allies of Pakistan did not oppose the move of FATF to put Pakistan in the alleged ‘grey list’. Action has, however, been deferred for about three months to enable Pakistan to show concrete and convincing action against the terror outfits on its soil, failing which the global money-laundering watchdog will place Pakistan on its terrorist financing watch-list later this year in June, when the forum meets for its next scheduled meeting.

China, Saudi Arabia and Turkey, which apparently in the initial phase of the meeting resisted the US pressure to place Pakistan on the list of states that lack effective regulations to combat terrorism financing but withdrew their support during the final phase allowing the motion to go smoothly. Some analysts hold that the Chinese decision should be seen as a reflection of their frustration with Pakistan’s constant failure to take effective action against the terrorism. As China has strategic partnership with Pakistan on several issues of political and economic significance, it is unlikely that it will abandon Pakistan for its terrorist links yet of late it has preferred to show its reluctance to support Pakistan on terrorism on other occasions too. For instance, in September 2017 during the BRICS summit too, China had allowed a reference to Pakistan based terrorist groups as the regional security threat. Recently, reports have emerged that China is holding talks with Baloch militants in Pakistan with a view to protecting $60 billion worth of infrastructure projects as part of the China-Pakistan Economic Corridor (CPEC). This also suggests that Chinese are apprehensive of Pakistan’s efforts and seriousness in curtailing militancy in the region.

Moreover, there is yet another view that China’s stand at the FATF was motivated by its own broader regional and international interests. One theory emerged that China is lobbying for a top position in the FATF and would need support from the sponsor countries. It is believed that the US and India pledged support to China in return for its neutrality on Pakistan. It is believed that China due to its compulsions may not come strongly against Pakistan on the issue of terrorism but clearly it is not happy with Pakistan’s lack of action against the groups like LeM, JeM and JUD, and other sectarian groups that are also a threat to China’s security and economic interests in the region.

While Pakistan has received over three-month reprieve before the FATF decision is practically implemented, it will really be difficult for Pakistan to show its grit to take decisive action against the alleged terror groups. Firstly, this is an election year in Pakistan and it will be an acid test for the political parties and leaders who often thrive on their anti-India stand, and the very terrorist groups working against the interests of India. Then, Pakistan army and establishment too are well known for their support to terrorism and it is yet to be seen how they will respond to this situation. Notwithstanding this, the three months of reprieve offers the country a window of opportunity in terms of taking serious steps in combating all kinds of terrorism. This also provides an opportunity for Pakistan’s civil and military leadership to bridge their own differences when it comes to forming a counterterrorism policy with consensus and taking on board all stakeholders in the country.

The Impact of Grey-listing on Pakistan

Despite boastful claims of some Pakistani ministers and political analysts, they are clearly weary of the possible fall out on Pakistan formally being put on the alleged ‘grey list’ in June 2018. Clearly with intent to stave off being put in the inglorious list, Pakistan has quietly adopted sanctions against two groups namely the JuD and Falah-e-Insaniat (FIF) which the US accuses of being fronts for the terrorist group LeT. Pakistan has moved to seize their schools, ambulances and other assets. The Punjab government in Pakistan had initiated action against these organizations linked to Hafiz Saeed, just days before the proposed meeting of the global watchdog FATF. It is a well-known fact that the United Nations and US had put Hafiz Saeed and LeT on the international terrorism blacklist years back and under tremendous international pressure, Pakistan too formally banned the LeT but allowed its alleged charity wings to continue operating and maintaining an extensive network of seminaries, schools, hospitals, a publishing house and ambulance services. However, apart from taking paper action, Pakistan has practically done nothing to curtail the activities of LeT from its soil.

Now that it is clear that Pakistan will be placed on the FATF grey-list in June 2018 failing to satisfy the international watch-dog, let us see what it actually means to Pakistan and how it would affect them politically and economically. Pakistani overtures indicate that they are not worried about sanctions and whatever action they take is in compliance of their own commitment to fight against the terrorism. It is also true that Pakistan though earlier put on the grey list from 2012 to 2015 but it didn’t have any significant adverse impact on Pakistan. This is evident from the fact that Pakistan continued to receive support from the International Monetary Fund (IMF), raised over $5 billion from the international bond markets and their imports-exports remained stable during the alleged period. Besides, during this period Pakistan also continued to receive security and civil assistance from the US.

Analysts argue that this time the story is different and the grey-listing may indeed hit Pakistan’s economy and make it harder for them to meet ever increasing foreign financing needs, including the future borrowings from the IMF and World Bank. The grey-listing could lead to a downgrade in Pakistan’s debt ratings, making it increasingly difficult to tap into the international bond markets. This argument has some solid logic as the country behind the current initiative is the US who has already stopped bilateral aid worth about $2 billion to Pakistan and by all probability they are likely to pressurise various international monetary institutions to put stricter conditions for Pakistan with a view to compelling them to take viable action against the terrorist network on the Pakistani soil.

Besides, another crucial political development may also have some impact on Pakistan this time. China, Saudi Arabia and even Turkey have historically supported Pakistan but signals are clear now that they will not unconditionally stand by Pakistan on the issue of terrorism. Apart from taking cosmetic action against the groups affiliated to Hafiz Saeed, Pakistan had also made a last-ditch attempt to mobilise support from its traditional allies, particularly from Saudi Arabia by agreeing to send an additional contingent of 1,000 troops to that country, which they declined to do in the past. However, all of these postures proved to be too little too late as the motion was finally passed without significant opposition despite Turkey having some reservations.

It is, however, important to view the FATF’s decision as one of several recent events that should concern Pakistan. As such, the President Donald Trump has made a concerted effort to coerce Pakistan into ending its support to non-state militant armed groups such as the Haqqani Network since coming to power in 2017. The famous twitter outburst of the US President “…Pakistan has given the United States nothing but lies & deceit” created flutter internationally for weeks together. Then the US then showed its resolve to squeeze Pakistan’s finances by suspending assistance of about $2 billion, which included military and civil assistance. Pakistan had survived previous pressures and sanctions from the international community and they have done virtually nothing against terror groups other than the ones harmful for their own interests.

Hafiz Saeed has gone to the extent of launching a political party in 2017, the Milli Muslim League (MML), and likes of Parvez Musharraf, ex-military ruler, already shown their keenness to work with Saeed’s political party. This time, the US along with its allies appear to be determined to punish the erring Pakistan but more time is needed to see the outcome of their revised strategy. On the last occasion, Pakistan was put on the watch-list only for money laundering but this time it will be monitored for its compliance with anti-money laundering and Combating Finance of Terrorism regulations, which might make some difference.

Should India Rejoice the Development!

The FATF is an inter-governmental body with the objectives to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorism financing and other threats to the international financial system. There is no doubt that the US has been instrumental in initiating action and behind the scene manoeuvring to ensure punitive action against Pakistan. Consequently, all the member countries, except Turkey, supported the motion put forth by the US and allies and there is every likelihood that Pakistan would be formally placed under the watch-list in the June next.

The decision of the world body is an encouraging move showing the resolve of the countries to combat terrorism by taking unified stand against it. This is also for the first time that China has not taken anti-India stand at the global anti-terror forum. These developments bring some solace and satisfaction to the Indian establishment which has been lobbying to expose Pakistan’s terror links for long before the international community. But the question is how far this will compel Pakistan to take action against the very terrorist groups whom they have been nurturing and abetting so far.

There is yet another connotation of these developments which many analysts have opined in the past. It is widely believed that politically unstable and economically weak Pakistan is more dangerous than a powerful and stable one because in such situation the Pakistani political and military leadership might resort to more vigorous anti-India campaign to divert the attention of the masses from the domestic problems. The past trend shows that whenever Pakistan is pressurised to act against the terrorism, it takes some action against the terrorist organizations operating along the borders with Afghanistan but it continues to encourage terrorist groups to target Indian interests. Hence India may derive some satisfaction over the punitive action against Pakistan for its constant failure to act against terrorism but a weak and unstable Pakistan would certainly pose a greater threat for the peace and stability in the Indian sub-continent.


More by :  Dr. Jaipal Singh

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