Why Pakistan could not escape FATF?

FATF in a sense presents the classic realist organization bending to the will of the most powerful state, unable to develop an independent influence. Pakistan has only one option, to improve its economic prospects and engage in proactive diplomacy and lobbying with all international actors for leverage in international organizations.

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The latest Financial Action Task Force (FATF) Plenary meeting is to be held from June 14th to June 17th. The country has been lobbying in the European capitals to garner support for the FATF. With a new pro-US government in Islamabad, speculations are ripe that Pakistan might be removed from the grey list. Pakistan is hopeful of finally escaping the grey list. FATF’s sixth plenary review held in March this year decided to retain Pakistan on the grey list even though the country complied with 26 out of 27 action items dictated in the 2018 Action Plan. The remaining one unaddressed item related to the prosecution of the senior leadership of UN-designated terrorist outfits. FATF is a global anti-money laundering (AML) and anti-terror financing (ATF) intergovernmental organization based in Paris.

The main objective of the organization is to set out detailed and comprehensive recommendations for countries to counter money laundering and terror financing. FATF reviews the AML and TF actions and policies devised by governments, identifies flaws and then provides recommendations to mitigate the shortcomings. Pakistan was placed on the FATF grey list in 2018 and was provided with twenty-seven parameters to implement in order to exit the grey list. Along with these twenty-seven parameters, Pakistan is also obligated to implement forty FATF recommendations which are reviewed separately by the Asia Pacific Group (APG).

Read more: FATF: A politically propelled financial enforcer

Understanding the matter better

The country was placed on the grey list owing to “structural deficiencies” in policies and procedures to counter money laundering and terror financing. Pakistan can escape the grey list if twelve FATF members vote that Pakistan’s performance is satisfactory. Interestingly in the same meeting, UAE, an important US ally, was added to the grey list of the FATF.

The development is significant as Washington has a history of sticking up to its allies in the Gulf. The complete immunity over the Yemen War and the consequent humanitarian crises for Abu Dhabi and Riyadh is one such example. There exists an understanding that the UAE was added to the grey list for defying US orders to condemn the ongoing Russian invasion of Ukraine. Prior to 2018, Pakistan was grey-listed on two occasions, once in 2008 and then from 2012 to 2015. Many in Pakistan already declare FATF as an instrument of the US to control its wayward allies and punish its adversaries.

India’s Minister for External Affairs S Jaishankar 2021 said that the Indian government had made sure that Pakistan remains on the FATF Grey List. Pakistan’s Foreign Office urged the organization to take notice of the controversial statement, which raised questions on the credibility of the entire mechanism of retaining members in the grey list.

Read more: HBL wins praise for Pakistan’s FATF achievement

This statement raised a question mark on the transparency of the FATF

The FATF President, Dr. Marcus Pleyer, refused to address the minister’s statement and simply claimed that all FATF decisions are made through consensus. The minister’s remarks and refusal of FATF leadership to categorically deny the claims made validate Pakistan’s unofficial position that geopolitics does play some role in earning a state a spot in the grey list.

If this explanation is accepted, FATF will become an international realist institution. Realists believe that international organizations have no independent impact or influence on international relations; rather, these institutions are simply instrumenting of great powers. The primary problem with FATF is that it can keep countries on the greylist even after complying completely with recommendations, as in the case of Uganda, which remained on the grey list for three years even after passing the FATF recommended laws.

Though FATF says that structural deficiencies are the core reason behind putting Pakistan on the Grey List, a senior US Diplomat Alice Wells stated that Pakistan was put on the grey list owing to its lack of effort in prosecuting Hafiz Saeed, the leader of Jamatud Dawa, the main accused of sponsoring incidents of terrorism in India. In 2020 Hafiz Saeed was convicted in a terror-financing case by Pakistan’s AntiTerrorism Court. In 2020 Islamabad Policy Research Institute (IPRI), a Pakistani think tank, conducted quantitative research to analyze the levels of compliance with FATF recommendations. The analysis showed that Pakistan and United States, in fact, had the same levels of compliance.

Read more: How Pakistan successfully implemented FATF’s Action Plan?

In fact, two years ago, Pakistan was more compliant than India

Now Pakistan has only one remaining parameter, but the country is unable to get delisted. In another damning report by the US think tank Royal United Services Institute (RUSI), it was clearly established that FATF, rather than acting on purely technical assessments, is prone to get influenced by certain prominent members. The international organization decisions are based on political reasons, particularly at the behest of the US, which remains its largest financier.

Certain states are able to evade strict actions from the global anti-terror financing body even despite evidence available in the public sphere. For instance, in 2020, a UN Report titled ” The 26th report of the Analytical Support and Sanctions Monitoring Team concerning ISIS, Al-Qaeda and associated individuals and entities” stated that there is a presence of ISIS terrorists in India, and the report alluded to terror financing from India. The mainstream media, as well as relevant international organizations, turned a blind eye to these allegations. Pakistan has, for a large part of its history, bent on the US will in key areas of foreign policy.

Read more: Imran Khan claims credit for FATF ‘achievement’

In 2018, Pakistan was hard of much use to the US besides a role in the Afghan Peace Process. But after crossing one bridge, Pakistan found another in the form of US demands for military bases. Islamabad’s refusal to condemn the Russian invasion of Ukraine and insistence on enhancing bilateral relations irked the US and other Western capitals even further. Hence even after complying with almost all parameters, the country still remains in FATF.

India factor is also a major driver behind Pakistan’s placement in the grey list

The statement by Indian External Minister reveals and validates independent reports and studies that FATF is prone to be influenced by powerful members and their allies. New Delhi is a key strategic partner for the US in the indo pacific. Washington would gladly undermine Pakistan to satisfy India, a US-sponsored regional rival to China.

FATF in a sense presents the classic realist organization bending to the will of the most powerful state, unable to develop an independent influence. Pakistan has only one option, to improve its economic prospects and engage in proactive diplomacy and lobbying with all international actors for leverage in international organizations. Diversifying relations and improving finances are the only solutions to avoid the blackmail by global actors.

Read more: FATF grey list: Hina Rabbani sparks criticism for not appreciating PTI efforts

If Pakistan is removed from the grey list in the next plenary meeting, the speculations that FATF is a political tool will only strengthen. The removal of the pro-Russian government from Islamabad and the advent of a pro-US government could be credited for Pakistan’s removal. Nonetheless, the decision to retain or remove will cause much controversy in Pakistan’s domestic political landscape.


The writer is a Political Scientist and Assistant Professor at the Department of Political Science in Abdul Wali Khan University Mardan. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.

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