ISLAMABAD – Pakistan faced a big diplomatic setback at the internationalforum of Financial Action Task Force (FATF) when it’s closest allies SaudiArabia and China dropped its support at the last moment.
Pakistan found itself on the watchlist of the global terror financingwatchdog on Friday evening after a dramatic volte face by two of its threeprincipal backers.
After the United States negotiated with China, and got Saudi Arabia to leanon the Gulf Cooperation Council (GCC) on Thursday, only Turkey was leftstanding with Pakistan as the plenary meeting of the Financial Action TaskForce (FATF) ended in Paris.
Being on the FATF’s watchlist means Pakistan can be placed in either the“black list” or the “grey list” of countries with strategic deficienciesposing a risk to the international financial system.
The FATF is an intergovernmental organisation founded at the initiative ofthe Group of 7 to establish standards for the effective implementation oflegal, regulatory and operational measures to combat threats such as moneylaundering and terror financing.
As of now, Pakistan does not feature on the FATF’s updated grey list, whichwas issued on Friday along with the FATF statement. The grey list is a listof “jurisdictions with strategic anti-money laundering/countering thefinancing of terrorism deficiencies for which they have developed an actionplan with the FATF”.
Pakistan has not yet “developed an action plan with the FATF”, which, asper existing FATF norms, is developed only after the FATF has carried out a“Mutual Evaluation”, or in-depth study of the financial system of thecountry.
Following the completion of an earlier process of Mutual Evaluation,Pakistan was put on the grey list in 2012, to follow the action plansuggested by FATF. In 2015, it was taken off the grey list, after the FATFwas satisfied that it had done enough to counter terror financing. The nextMutual Evaluation starts in April, which is expected to take at least 18months of study, followed by another 12 months of analysis. An Action Planfor overcoming “strategic deficiencies” would be suggested at the end ofMutual Evaluation.
However, in the absence of a latest Mutual Evaluation report for Pakistan,the US, along with the UK, France and Germany, started an unprecedentedprocess at the FATF meeting in Paris. They co-sponsored a motion tonominate Pakistan as a country having “strategic deficiencies” in“countering financing of terrorism”.
This motion was passed on Thursday — and Pakistan is now required to submitan Action Plan to FATF in May. Once the FATF approves the Action Plan inJune, it will make a formal announcement about placing Pakistan on the greylist. Should Islamabad fail to submit an Action Plan, or if the FATF doesnot accept it, the global watchdog will have the option of placing Pakistanon its black list, along with North Korea and Iran.
Pakistan’s recent actions against Hafiz Saeed’s charities and strongdiplomatic lobbying to avert grey listing was undone by some deft movesfrom the US in Paris. While the FATF works on consensus, a vote by at leastthree members is required to block a nomination in the 37-member grouping.
During the preliminary discussions between Sunday and Tuesday, the US-ledproposal was opposed by China, Turkey and the GCC. The GCC was followingthe lead of Saudi Arabia, which is an observer, and not a full votingmember of the FATF.
On Wednesday, Pakistan Foreign Minister Khawaja Asif posted an update onTwitter that Pakistan had received a three-month reprieve, stating that itwas “grateful to friends who helped”.
This followed the US decision to not put the nomination to vote onWednesday, the first day of the plenary session. But Asif’s prematureannouncement came a cropper when US officials negotiated with China andSaudi Arabia behind the scenes, bringing the two countries around to itsview on Pakistan’s terror financing.
The Chinese turnaround came after the US offered it the vice-presidentshipof FATF from July 1.
The FATF Vice-President is also the FATF President-designate, which meansthat Beijing will head the terror financing and money laundering watchdogfor one year starting July 2019.
Sources said that the US also leaned on Saudi Arabia, which is hoping tobecome a full member of the FATF in June, to ask the GCC to drop itsopposition to the proposal.
The US and the three co-sponsors then moved the proposal on Thursday, whichwas opposed only by Turkey.
Sources said Islamabad’s aggressive lobbying prior to the meeting and thepublic announcement by its foreign minister contributed to the mood againstPakistan.