Hard Tasks & the Financial Action Task Force

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Sahar Pirzada*

*The author is an editor of the journal and an educationist.

The FATF decision to place Pakistan on the grey list has been an unpleasant jolt back to reality. It is not true that Pakistan has done little or nothing in the fight against extremism. The cost of this ideological and armed war has been high to Pakistan and it is an open secret that a blind eye is kept for certain extremist outfits but it is also true that Pakistan is an easy scapegoat to vindicate lack of success in Afghanistan by foreign forces. Pakistan makes for an easy target in justifying failure in Afghanistan. Righted, wronged or victimized, at the end of the day Pakistan must also do some hard thinking of its own to look at what benefits Pakistan in the long run. Pakistan must seek more than merely immediate survival and plan for long term prosperity.

Gullibility & Half Truths

In Paris, with the Financial Action Task force, Pakistan found itself cut down to size. Perhaps the problem with the picture of itself that Pakistan paints for the world begins through the indigenous model of politics that has found success here. Anyone can say anything and if it is said convincingly, or loudly enough people will believe it. There is a reluctance to talk about the truth and though shiny headlines of counter-terror achievements placate domestic anxiety, a whitewashed version of the facts on ground has deprived Pakistan’s story of its appeal internationally. No one really believes it anymore. Why is it that we think the world will believe whatever we tell them? Perhaps it’s because our leaders have become used to exploiting a gullible populace at home. They have become very used to having their lies believed. How so? When a Zardari speaks against corruption or when an Imran takes the crutch of dynastic politics to build a ‘naya Pakistan’ or, for that matter, when a Sharif addresses the tribulations of poverty at a public rally wearing multimillion Rupee accessories, domestically we find ourselves entranced. We fall victim to their politically motivated sanctimony, their white lies now a white noise in our lives. The gullibility of the domestic throngs leads the leaders to believe the world will be fooled by their whitewash when the writing on the wall is clear as day. The times of Pharonic, even delusional “so I have said, so it shall be written” versions of politics and history are over. Not all facts can be drowned out by confident, cacophonous volubility – by misleading words alone. Even loud words need the force of evidence behind them. The world can piece together its own facts. And that has not worked out too well for Pakistan in Paris. What is even worse is that this altered reality has divorced national and policy thinking from what is really happening. Have we begun to believe the half-truths we tell? Have our successes engineered in the tweetiverse blinded us?

FATF, Our Paris Blues

Pakistan’s complacency led to its isolation at the Paris meeting of the Financial Action Task Force. The FATF is an intergovernmental policy making body that sets standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.1 It has developed a set of 40 regulations that most countries voluntarily embrace.

The FATF has decided to place Pakistan on the Grey List from June 2018 if it shows that it has not taken adequate measures to curb terror financing. Not only was Pakistan unable to convince the FATF of its commitment and successfully present its case, Pakistan found itself standing alone even amongst allies like China & Saudi Arabia. If being included on the Grey List was not bad enough, this lack of support added insult to injury. The only one who stood behind Pakistan in the hour of reckoning was Turkey, which, in likelihood, just provided token support knowing that it would not change the outcome.

Prior to the meeting and after the United States prompted motion to put Pakistan on the terror financing watch list, diplomatic moves were mounted by Pakistan to garner support. Mitfah Ismail, the Prime Minister’s advisor on Finance, visited key Western capitals in hopes of support as did a couple of other Ministers who travelled to FATF Member countries.2 The only success Pakistan found was with Saudi Arabia and China and thus consensus was not reached at the pre-plenary meeting against Pakistan. But the rosy confidence was short-lived. Two things went wrong.

Saudi Arabia and China were convinced to withdraw their support. Where Clausewitz had once said, “war is politics by other means”, one can confidently say “War is no longer politics but economics by other means to attain geopolitical effects.”3 This is where organizations like the FATF play a vital role. Saudi Arabia has a long and intermeshed association and increasing cultural hold over Pakistan so why did it buckle under pressure leaving Pakistan out in the cold? According to political theorist Carl Von Clausevitz, “What we should admire is the acute fulfillment of the unspoken assumptions, the smooth harmony of the whole activity, which only become evident in the final success.”

Economics is the mother of persuasion. KSA is also a beneficiary of economic warfare and is aiming to construct 16 nuclear reactors at a cost of $60 billion in the coming years. The firm bidding for the Saudi construction project is the American “Westinghouse’ that filed for bankruptcy last year 4. This technique of ‘soft power’ as opposed to military action is enough to pressure governments. Similary, the FATF decision has finally successfully pressurized Pakistan to compliance.

The second mistake receiving criticism from the intellectual aristocracy of Pakistan is the premature, congratulatory tweet of Pakistan’s Foreign Minister Khwaja Asif in Moscow at the time saying, “a consensus could not be developed” to put Pakistan on the list and that “our efforts paid”, “grateful to friends who helped”. This ensured the withdrawal of support from Pakistan’s two allies, especially since such moves are considered against FATF protocols.

Why we lost support from China is a multifaceted buildup.

It is a harder task, but Pakistan should have done more to meet its commitments to arrest terror financing in Pakistan rather than run helter skelter to rally support at the FATF. Had we at least attempted to show serious effort in this regard the world would have viewed us through a much softer lense.

Losing China at the FATF:

China has been our friend and has pointedly stood up for Pakistan at international forums including the BRICS Summit and when India moved to have Pakistan declared as a terrorist State. China has also invested $60 billion in the CPEC development project in Pakistan. It is clear China has long term goals tied up with Pakistan.

It is curious why Pakistan was faced with a stoic silence from China in Paris. Or is it?

China is also adept at producing far-reaching geo-political effects through economic warfare. Proof of which is that its influence is more far reaching than in Asia and Europe. It is extending loans to 33 member countries of the Confederation of Latin America and Caribbean states. Chinese exports to these countries have increased by 30% and since 2014 mutual trade between them has risen to $200 billion. Gwadar is not the only port it is invested in. China is financing the construction of a port in Columbia and is upgrading Argentina’s railway. In the last year alone its loan to Latin America has grown to $9 billion.5 China’s global conceptualization is much wider. It is not limited to one region and one people.

It’s interests and ambitions are gargantuan in scope and with its commitment to CPEC, ever pushing against the reservations of Iran, the US and India, China has put Pakistan in the centre of its vision. As a token of enduring partnership Pakistan needs to address the issue of militancy. China itself faces challenges on its western border of the Uighur province. It has claimed that the Uighur militant group, the East Turkistan Islamic Movement (ETIM), receive training and have bases in Pakistan and Afghanistan.6 Pakistan claims these have been eliminated from its soil.7 However, escalating militancy with cross border alliances in Afghanistan will continue to feature as a potential threat and feeder to China’s domestic issue of the same. It is cause for forfeiting friendship and highlighting self-interest. China needs to be stern on and counter any fundamentalist notion that might cause a problem later.

Then, there might have been an additional contributing factor. China has been elected to the chair of Vice President of the FATF and there is speculation that an understanding has been reached on giving China a larger role in the organization. Analysts cannot confirm if any deal has been made with China but have said that “given China’s track record of striking bargains for its vote in international organizations, it was possible that Beijing had done the same at the FATF plenary.” 8

China has lent support to Pakistan on many occasions internationally but China has its own interests to safeguard. CPEC, Uighur-born militancy networks with Pakistan & Afghanistan and a newly earned VP-ship will be influencing agents in that calculus.

It is a hard task but it is imperative that Pakistan also consider the degree of investment its friends and allies have in Pakistan and be cognizant of how far they are willing to stretch themselves, if for nothing else, keeping Pakistan’s self-interest in mind.

Simply Talking the Talk

Pakistan has to accomplish the hard task of going beyond vacuously talking the talk and actually walking the walk. Increasingly there has been an erosion of the boundry between the civil and military leadership which subsequently has also rendered foreign policy impotent. Are military interests aligned with the interests of civilian governments? Do civilian governments constitute the extremist vein that foreign forces are adamant to snuff out?

According to Senator Farhatullah Babar, Pakistan needs to shun its “double game” in the war against terror. He said Pakistan has streamlined militants and allowed them to form their political parties to contest general elections.9

If Pakistan is serious about curbing terror financing and weeding out extremist organizations it needs to be clear in its approach. It is a contradiction in policy and action when Sufi Mohammad is allowed to walk free and onto TV screens. This is the same man who wanted to enforce Sharia law in Dir and Malakand and later became the force behind the Swat Taliban along with Fazlullah, his son in law. Our short term memory can lead to consequences when he is portrayed as repentant patriot praising the army and condemning the Taliban.10 This is the man who caused a takeover of Pakistan’s mainland in Swat. Finally, the army ensured a roll back of the Taliban in Malakand and it was made clear who would call the shots in Pakistan. That model for battling militants became the standard operating procedures to be used elsewhere in the country. Another triumph of this operation was that Pakistan did not accept assistance from outside forces or accept help volunteered by the US proving that when its resolve was solid, Pakistan needed no outside help.11

The acceptance of a repentant Sufi Mohammad sends out the message that the state will make room for the likes of him and the symbolism of this action cannot be positive in fighting extremism which is just as much a war of mind and heart. Are we telling the people of Pakistan and the outside world that our perspective on such land and mind victory in Swat by the extremists will be allowed again?

Also the treatment of Ehsanullah Ehsan who has the blood of 150 children on his hands and can be treated as a “state guest.” 12 Again, in the words of Senator Farahtullah Babar,“These examples reinforce that Pakistan is not sincere in eliminating all terrorist groups.” 13

Further, the KP government doled out two grants or Rs.300 million and Rs.270 million to Dar ul Uloom Haqqani when Maulana Sami ul Haq openly claims that the Taliban are like its children. Is this not an open admission of support counter to official policy?

“The interior ministry is responsible for determining whether any group is to be banned under the Anti-Terrorism Act of 1997. But their job does not stop there, it is supposed to keep tabs on such organizations and prevent them from re-emerging. Many organizations have reinvented themselves. Amongst others “Hafiz Saeed-led Lashkar-e- Taiba (LeT) was banned in 2002. The group and Saeed were able to reinvent themselves under the banner of Jamaat-ud-Dawa (JuD) and expand their operations into a vast charity network as well.”14

The list of contradictions and lapses is long.

What is the true narrative when Pakistan talks the talk and does not walk the walk? People like Sufi Mohammad are welcomed straight into the media, negotiations are undertaken with the Khadim Hussain Rizvis who hold the capital hostage. Or when Hafiz Saeed, leader of the Laskhar-e-Taiba (LeT)/JuD and the man perceived to be responsible for the 2008 attacks in Mumbai is released from house arrest in November of 2017. Then there is also the yet not abandoned effort to mainstream LeT, and so the Milli Muslim League (MML), a political party associated with Hafiz Saeed, was launched last year.

What is the symbolism of all these moves? Where is the synergy of speech and action? Where does the verbal commitment translate to kinesis?

Unfortunately, the world sees this while the Pakistani populace walks around placated, with its eyes wide shut.

A Breathless Scramble

By mid 2017 Pakistan had frozen the accounts of 5,000 suspected terrorists, taking about $3 million out of their pockets.15 Efforts were being made to sweep extremist outfits but it was not enough. Now after the Paris meeting of the FATF, Pakistan has three months to put its house in order before being put on the Grey Watch list of terror financing.

As of March this year according to the Interior Secretary Arshad Mirza, all properties of Jamat ul Dawa(JuD) and its charity foundation Falah e Insaniyat have been confiscated in AJK and Gilgit Baltistan and 148 properties have been taken away in Punjab. 3 immovable assets of the two organizations were taken away in ICT, including hospitals and dispensaries, and the Pakistan Red Crescent has been directed to take over seven ambulances associated with them.

There has been a crackdown on these organizations as they were on the United Nations Security Council’s sanction list according to Resolution number 1267. Additionally, the Anti -Terrorism Act of 1997 was amended through a rather hushed Presidential ordinance on 9 February 2018 for taking action against these three organizations. In this mad scramble to set things right it is wondered if this ordinance was vetted by any legal team having expertise in international law. The Finance Ministry was the lead agency on this and the passports and gun licenses of people associated with these organizations will be cancelled. The JuD had been declared a terrorist front group by the United Nations Security Council in 2008 . Why this slow motion when the authorities were au courant with their logistics all along?

Perhaps Pakistan should not have taken such a lackadaisical approach with NACTA earlier which neither hired the required staff nor utilized the funds according to the timetable.

Foreign Policy & the Perennial Chip

Pakistan has to develop policy and an international posture to fight for its own self, its own survival. It can do so with the help of friends but with a direction and policy that suits and safeguards its priorities.

Blaming India for everything, even though there is enough evidence to prove that fact, is also not the best way forward, especially with India’s growing alliance with the US, Iran and others. They have been astute with their international relations, having employed lawfare to their advantage. Lawfare is a term coined by Charles Dunlap and it is the practice of using law to achieve a military objective. 16 This concept is built on an amalgamation of law, justice and the attainment of objectives through force and intimidation. Strategic legal battles can be fought through lawfare which India has been successful in employing. Further, it justifies attacks on Pakistan, painting their offensive as counterattacks by linking Kashmir rebels to terrorist organizations and laying the blame on Pakistan for being a support base for these extremist outfits.17 Pakistan needs to develop the capability to deal with international law so it ensures Pakistan is not forced into a adopting policy that merely appeases foreign allies but buttresses its own policy objectives while remaining within what international law requires of them. At this point in time even the Pakistani Foreign Minister is not competent enough in the protocols of international organizations and it is really his preemptive, enthused tweet that cost Pakistan its status on the FATF Grey List.18

Interestingly, the FATF also deals with money laundering and Pakistan has in the recent past been in the headlines for the same. All three of the leading party heads have been called to court for justification or have been linked to money laundering scandals. How vulnerable does that make Pakistan.

It is not that Pakistan has done nothing. Pakistan has done a lot but what is missing is a decisive clarity on how the task is to be accomplished. Pakistan has banned organizations, frozen their accounts and expunged extremists off its soil. But the truth is that those extremists are not picked up by the US or Afghanistan once forced back to Afghanistan from where they came. India often launches attacks on Pakistan through them from Afghanistan or Iran. Advisor to the Prime Minister on Finance, Miftah Ismail, has said that anti-money laundering laws are in place in Pakistan 19 and Pakistan has been put on the list due to the insistence of the US and India. Pakistan described the move as “politically motivated, with the aim to undermine its economic progress.” 20 It is also being seen as part of the US Afghan policy to pressure Pakistan.

It is fair to say that Pakistan’s emerging role due to its geo-strategic positioning with China for CPEC makes the US, India and Iran nervous. Filtering through adamant denials one can see the rival port Chabahar in Iran in collaboration with India as a case-in-point of that discomfort. China is a growing power. Is there a possibility that this added pressure on Pakistan has been engineered to keep Pakistan in a position of vulnerability and undermine its CPEC possibilities and successes to come? If anything, CPEC needs to be Pakistan’s bargaining chip not its vulnerability. Whatever the case, it is an important task for Pakistan to play its cards well. So far its only focus has been on making and breaking its own government. Pakistan needs to improve relations with all its neighbours and not just rely on China as it could lose patience if Pakistan turns into an internally split, ungovernable, extremist-infested chaotic mess.

Gains and Losses

Pakistan is subjected to direct monitoring and intense scrutiny by the International Co-operation Review Group (ICRG) on terror financing, pending further review in June. Pakistan will, under a “Compliance Document,” be required to furnish a fresh report to the International Co-operation Review Group (ICRG).

Now, after the initial jolt, once the dust settles, it is important to gauge the economic impact of this decision and what it might mean to Pakistan’s security and strategic positioning.

Though this might not be a blessing per say, it is also not true that this will affect its ever-escalating foreign financing needs, including from the IMF. Neither does evidence suggest that this will downgrade its debt ratings augmenting its challenge to tap into the international bonds market.

Surprisingly enough, this dystopian state of finding itself on the Grey List is not new to Pakistan. Pakistan was on the list from 2008 to 2010. It also remained on the Grey List from 2012 to 2015. During this period bonds were launched into the international market and loans secured from the World Bank and the Asian Development Bank.21 From the period 2012- 2015 Pakistan successfully completed the IMF programme and raised $5 billion from the international bonds markets and both imports and exports remained stable, suggesting that this action did not raise any barriers to trade at the time.22 Perhaps the claim that the economic impact of this listing will be minimal holds some credence as the ten year bonds issued in 2017 have had a decline in their yield from 7.4% on February 14th 2018 to below 7.1% on February 26th 2018. 23 The decision to put Pakistan on the Grey List was taken on the 23rd of February, indicating that as not being the reason for the decline.

However, it is also true that in the past when the US is displeased with Pakistan it freezes and squeezes Pakistan’s finances. Over $1 billion of assistance was suspended, including military assistance and the release of Coalition Support Funds (CSF), which the United States owed to Pakistan for military operations.

This setback has eclipsed the fact that concurrently while Pakistan was having its wrist slapped in Paris, it was getting a pat on the back, so to speak, in Brussels. The positive turn of events in the ongoing scenario of doom and gloom is that due to sustained efforts over the years to comply with European Union standards the EU has decided to extend its GSP- Plus status to Pakistan. This should result in gains to Pakistan’s exports, especially pertaining to the textile industry. The GSP-Plus renewal speaks loud and clear about how the European community views Pakistan as a whole. The EU is Pakistan’s most important trading partner. This puts the EU in a strong negotiating position and before Pakistan rejoices this gain it must consider that this motion at the FATF was jointly moved by the US and three key powers of Europe: the UK, France and Germany. There is a caveat to be considered here. Before striking off the potential losses to the economy with an optimistic flick of the wrist we must consider that insufficient compliance with the standards set by FATF might impact the mood of the EU in not just the lucrative textile sector but also with respect to the country’s banking channels with Europe.

The only gains that can be seen coming from this fiasco are that perhaps now the government, under pressure, might finally tackle the hard task of sincerely addressing the ubiquitous presence of extremist elements in the country. It will certainly give impetus to that task, that it might not remain selective in crackdowns and that NACTA might be galvanized out of its sedation. It might also prompt a review of our foreign policy.

Concluding Analyses

Hard tasks are cumbersome but far from impossible to achieve. The FATF decision is a wakeup call for Pakistan. It needs to cleanse extremism off its soil and get down to some serious business. A rethink of the civil-military viewpoint on strategic issues and framing of a better, less myopic foreign policy is the order of the day. Pakistan needs to improve its relationship with just about everyone and take stock of the fragility of relationships between countries, even if long term interests are at stake, keeping in mind the disappointment of the Chinese silence felt at FATF. Pakistan needs to replace its contradictions with a unified vision in economic, military and policy terms.

It is conceivable that the FATF may work in Pakistan’s favour and incentivize it to rise like a pheonix from the ashes of mistakes. This setback might help fill the lacuna between intention and activity. One can only hope.


1- http://www.fatf-gafi.org/about/

2- https://tribune.com.pk/story/1644771/1-fatf-fiasco-govt-looks-inwards/  26th February 2018.

3- https://tribune.com.pk/story/1645514/6-fatf-war-means/ By Muhammad Ali Ehsan – February 27, 2018.

4- ibid

5- ibid

6- https://www.dawn.com/news/1204443 2nd Sept 2015.

7- ibid

8- https://tribune.com.pk/story/1645225/3-india-congratulates-china-election-vice-president-fatf/ 26th Feb 2018.

9- https://tribune.com.pk/story/1653032/1-counting-cost-fatf-action-result- ignoring-trump-tweet/   by Sehrish Wasif published: March 7, 2018.

10- The Express Tribune- Welcome Back by Tallat Hussain 22nd January 2018.

11- ibid

12- According to Senator Farhatullah Babar.

13- https://tribune.com.pk/story/1653032/1-counting-cost-fatf-action-result- ignoring-trump-tweet/   by Sehrish Wasif published: March 7, 2018.

14- https://tribune.com.pk/story/1118483/weak-enforcement-banned-groups-continue-resurface-new-names/ – 8th June 2016.

15- https://nation.com.pk/03-Jun-2017/how-pakistan-is-tackling-terror-financing-to-stay-off-a-list-of-terror-friendly-nations June 3rd 2017.

16- The Express Tribune – Bullying through Lawfare –by Hamza Mehbub – 2nd March 2018.

17- ibid

18- https://video.pakistantv.tv/2018/03/01/ho-kya-raha-hai-political-discussion-with-sherry-rehman-28-february-2018-92newshdplus

19- https://tribune.com.pk/story/1648795/1-placed-fatf-grey-list-not-harm-economy-ismail/ -By Qadeer Tanoli -Published: March 2, 2018.

20- The Express Tribune _US offers Pakistan New Partnership but with Caveat- 27th Feb 2018.

21- https://tribune.com.pk/story/1648795/1-placed-fatf-grey-list-not-harm-economy-ismail/ -By Qadeer Tanoli Published: March 2, 2018.

22- https://thediplomat.com/2018/03/how-will-being-on-the-fatf-grey-list-actually-impact-pakistan/ by Uzair Younas- 1st March 2018.

23- ibid