FATF notes Pakistan's failure to meet deadline to curb terror-financing, but decides against putting it on blacklist

Pakistan on Friday escaped blacklisting by the Financial Action Task Force (FATF), even as the inter-governmental agency noted that Prime Minister Imran Khan's Government in Islamabad had failed to complete its action-plan to squeeze flow of fund to terrorist organizations.

The FATF's week-long plenary in Paris concluded on Friday with the agency deciding that Pakistan would continue to remain on its “grey-list” – officially a list of “jurisdictions with strategic deficiencies in its legal regime to check money laundering and terrorist financing”.

With its allies China, Malaysia and Turkey overtly supporting it and the United States too tacitly throwing its weight behind it, Pakistan was not immediately put on the “black-list” of the FATF – an intergovernmental agency, which coordinates global effort to stop money-laundering and illicit flow of fund to outlawed terrorist organizations.

“All deadlines in the action plan (the FATF agreed with Pakistan Government in June 2018) have expired,” the global organization said in a statement released after its plenary. “While noting recent and notable improvements, the FATF again expresses concerns given Pakistan’s failure to complete its action plan in line with the agreed time-lines and in light of the terror-financing risks emanating from the jurisdiction (country)”.

A review by the FATF found that Pakistan Government had largely implemented 14 of the 27 measures it had agreed to put in place to tighten its mechanism to stop illegal funding to terrorist organizations. It revealed that Khan Government in Islamabad had achieved varying degree of progress on the rest of the action-plan, which it had agreed to implement after the FATF had put Pakistan on its “grey-list” in 2018 for deficiencies in its Anti-Money-Laundering and Counter-Terrorist-Financing (AML/CFT) regime.

The FATF had in October 2019 set February 2020 as the deadline for Pakistan to deliver on its promises to plug the loopholes in its legal framework to squeeze flow of fund to the terrorist outfits. The intergovernmental organization warned that if Khan Government failed to deliver on its commitment, Pakistan might be put on its “black-list” - officially the list “jurisdictions with strategic AML/CFT deficiencies for which a call of action applies”.

But even as Pakistan failed to fully implement the June 2028 action-plan, the FATF plenary this week decided against putting the country on the “black-list”.

The FATF, however, urged Pakistan to swiftly complete its full action plan by June 2020. “Otherwise,” it added, “should significant and sustainable progress especially in prosecuting and penalising terror financing not be made by the next plenary, the FATF will take action, which could include the FATF calling on its members and urging all jurisdiction to advise their financial institutins to give special attention to business relations and transactions with Pakistan.”

Pakistan's “iron-brother” China and its allies, Turkey and Malaysia, overtly supported it during the FATF plenary, highlighting the measures it had already put in place to tighten its AML / CFT mechanism. What however caused unease in New Delhi was the fact that US too tacitly helped out Pakistan at the FATF plenary.

The US had in 2018 supported the move within the FATF to put Pakistan in the “grey list” – officially a list of “jurisdictions with strategic deficiencies in its legal regime to check money laundering and terrorist financing”.

But Trump Administration had to change its approach on Pakistan, because it had to rely on Khan Government to clinch the peace-deal with Taliban in Afghanistan.

The US in fact hinted ahead of the FATF plenary in Paris that it might throw its weight behind Pakistan. Alice Wells, acting US Assistant Secretary of State for South and Central Asian affairs, posted on Twitter earlier this month that recent conviction of the radical cleric Hafiz Saeed by a court in Pakistan was “an important step forward” by Pakistan – “both toward holding (the) LeT (Lashkar-e-Tayyiba) accountable for its crimes” and for meeting the “international commitments” of Khan Government in Islamabad to “combat terrorist financing”.

Wells had earlier visited Islamabad on January 21 to meet senior Pakistan Government officers and had lauded the initiatives Khan Government had made to tighten the legal and administrative mechanism to stop the flow of funds to terrorist organizations.

New Delhi, however, remained sceptical about the Pakistan’s sincerity in squeezing flow of funds to terrorist outfits and combating the menace of terror.