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EFSAS Commentary

Ayman al-Zawahiri may have freed Pakistan from FATF listing, but that has raised fears of reversion to old terror-happy ways


Islamabad, without doubt, put in major work to extract itself from the debilitating clutches of the grey list of the global anti-terror financing watchdog, the Financial Action Task Force (FATF), last week. After the initial slipshod and wishy-washy response to grey listing in 2018, Pakistan was dealt the firm message that the FATF would not hesitate to black list the country if it continued in the same evasive and shifty vein. That forced some urgency into the Pakistani response in the latter part of these past four years, even if counter terror experts got the distinct impression that more was being done and claimed by Pakistani officials for the sake of form rather than substance. As a repeat populator of the FATF grey list, having figured on it from 2008 to 2010 and from 2012 to 2015 before the most recent listing, the question that arises now is whether Pakistan has any inherent interest in curbing the terror machinery that it has specialized in creating or whether it will be business as usual with the likes of the Haqqani network and the Lashkar-e-Taibah (LeT) or their tactically re-christened successors. History as well as current events even as Pakistan was exiting the grey list both point towards the latter alternative.

Pakistan had been listed by FATF in June 2018 because of “strategic counter-terrorist financing-related deficiencies”, and had been handed a wide-ranging reforms programme to comply with the FATF’s standards. Pakistan’s deficiencies to fight money laundering and combat terror financing that were identified by the FATF were in its legal, financial, regulatory, investigations, prosecution, judicial and non-government sectors. These were deemed by the FATF to be of a level that was considered a serious threat to the global financial system. The programme initially had a 27-point action plan that was later bolstered with the addition of another 7-point plan. Islamabad made high-level political commitments to address these deficiencies under the FATF action plan, and it has since been working with the FATF and its affiliates to strengthen its legal and financial systems against money laundering and terror financing in line with 40-recommendations of the FATF.

At the end of its most recent two-day plenary, the FATF announced in Paris on 21 October that it was satisfied that Pakistan had adequately implemented the 34-point action plan and was therefore finally being removed from the grey list. Addressing the press conference at the conclusion of the plenary, FATF President T. Raja Kumar noted that “After a lot of work by Pakistani authorities, they have largely addressed all of the action plan items. As a result of these action plans, Pakistan has made significant improvements to strengthen the effectiveness of this framework for combating terrorism financing”. In a handout, the FATF said that it welcomed the “significant progress” by Pakistan in improving its anti-money laundering and combating financing terror (AML/CFT) regime. It continued, “Pakistan has strengthened the effectiveness of its AML/CFT regime and addressed technical deficiencies to meet the commitments of its action plans regarding strategic deficiencies that the FATF identified in June 2018 and June 2021, the latter of which was completed in advance of the deadlines, encompassing 34 action items in total. Pakistan is, therefore, no longer subject to the FATF's increased monitoring process”. It added that Pakistan would, nevertheless, continue to work with the Sydney-based FAFT-affiliated Asia-Pacific Group (APG) to further improve its AML/CFT system.

Reactions to the FATF decision within Pakistan were upbeat, with everyone seeking to claim credit for it. The glee was understandable, given that Pakistan is weathering multiple crises at this juncture. Concerned over its falling foreign reserve as well as its precarious funding situation and economic stress after the recent devastating floods, two rating agencies, Fitch and the Moody’s Investor Service, had cut Pakistan’s sovereign credit rating. Being on the FATF grey list, meanwhile, was severely restricting Pakistan’s international borrowing capacity. Removal from the list has come as a welcome relief that may help Pakistan access aid to pull itself out of its crippling economic crisis.

Prime Minister Shehbaz Sharif averred that Pakistan’s exiting the grey list was a “vindication of our determined and sustained efforts over the years”. He congratulated the civil and military leadership as well as all institutions that had contributed towards achieving the decision, with the role and efforts of FM Bilawal Bhutto-Zardari and Army Chief General Qamar Javed Bajwa coming in for special praise. Foreign Minister Bilawal Bhutto-Zardari congratulated the country even before the FATF press conference began. He tweeted, “Congratulations to the people of Pakistan. Pakistan has officially been removed from the FATF ‘grey list’. Pakistan Zindabad”. Finance Minister Ishaq Dar said that the efforts of the civil-military team, under the leadership of PM Shehbaz, in achieving the goal were “highly commendable”. Minister of State for Foreign Affairs Hina Rabbani Khar said that this “long and arduous journey” had only been made possible through strong political ownership across the political spectrum. She added, “It shows Pakistan can achieve much when we work together for Pakistan’s interest”. On the other hand, former Prime Minister Imran Khan’s Pakistan Tehreek-e-Insaaf (PTI) party leader Imran Ismail claimed that the credit for the “achievement” must go to the PTI government that was in power till April, and to the tirelessly work of Imran Khan’s team. PTI’s Babar Awan shared a picture of the National Assembly in session, stating that this was taken on the day he presented bills related to Pakistan’s removal from the grey list. He exclaimed, “The imported Prime Minister (as the PTI refers to Shehbaz Sharif) and his courtiers stood up and opposed these bills. Pakistanis, do not forget”.

Perhaps the most appropriate reaction was that of Pakistan People’s Party (PPP) leader Farhatullah Babar, who reminded everyone that Pakistan’s inclusion in the grey list was “largely because of the perception of running with the hare and hunting with the hound in fighting militants”. He also offered apt advice for the future when he added, “Hope lingering perception indeed is corrected and lessons learnt. Congratulations”. Meanwhile, the Pakistani daily Dawn, in an editorial on 23 October suggested that “It is a victory that ought to be celebrated as an example of what it is possible for the country to achieve when the national leadership works together towards a common goal”. What the reputed daily skipped mentioning was that similar concerted national action, if oriented towards the more relevant “common goal” of once and for all forsaking terrorism as an instrument of State policy, would not only be more meaningful and productive, but would also benefit Pakistanis more in every sense of the term. 

India, which along with Afghanistan, has had to face the main brunt of the terrorism unleashed across the region by Pakistan over the decades, responded to the FATF decision with caution and foreboding. Asserting that Pakistan must continue to take credible action against terrorism, India’s Ministry of External Affairs (MEA) pointed out in a statement that “As a result of FATF scrutiny, Pakistan has been forced to take some action against well-known terrorists, including those involved in attacks against the entire international community in Mumbai on 26/11”. Emphasizing that “It is in global interest that the world remains clear that Pakistan must continue to take credible, verifiable, irreversible and sustained action against terrorism and terrorist financing emanating from territories under its control”, the MEA said that it understands that Pakistan will continue to work with the APG on Money Laundering to further improve its anti-money laundering and counter-terror financing system.

FATF President Singapore’s T. Raja Kumar expressed similar views when he said, “They've (Pakistan) been removed from the grey list, however, there’s still work to be done on their part. I’m encouraging Pakistan to continue to work with the Asia-Pacific group to continue taking steps to combat terrorism financing”. Skepticism over Pakistan’s real intentions, triggered by Islamabad’s own dismal track record, is well founded. 

When Pakistan first figured on a FATF list in February 2008, the watchdog had noted Pakistan’s recent progress in adopting anti-money laundering legislation but urged financial institutions to be aware of the “remaining deficiencies” that could constitute vulnerability in the international monetary system. It exited the list after giving a “high level” commitment in June 2010 that it would work with the FATF and the APG to sort out these differences. When Pakistan next came on the list in 2012, the FATF public statement listed Pakistan among countries with “strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies”. In June 2015, the FATF again pronounced that Pakistan was “no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process”. In its decision, the FATF said it welcomed Pakistan’s significant progress in improving its AML/CFT regime and noted that Islamabad had established the legal and regulatory framework to meet the commitments in its action plan regarding the strategic deficiencies that the FATF had identified in June 2010. This statement was not very different to the one that FATF made last Friday regarding Pakistan. If the 2015 example is viewed as a precedent, it took Pakistan only another 3 further years, till 2018, to wind its way back onto the grey list for precisely the same deficiencies as earlier, including the absence of enforcement actions against UN-designated terrorist entities. This not only raises serious doubts about Pakistan’s willingness and seriousness to turn the terror-sponsoring corner, but also gives the clear impression that for Islamabad, reputation, credibility, and pride of place in the international community are less important than retaining control over its terrorist assets to violently further its often illegal political and strategic goals.   

A clear sign of Pakistan’s continued inclination towards, and affinity to, terrorism and terrorists is being evidenced in its current handling of the designation of terrorists at the United Nations (UN). Even while it has simulated opaque and farcical trials of dreaded terrorists such as Hafiz Saeed and Sajid Mir just to appease the FATF and get it off its back, Pakistan, as recently as last week, has been putting its patron, the veto-wielding China, forward to stymie international efforts to list Pakistani terrorist assets at the UN Security Council (UNSC). Following a long line of earlier such actions aimed at obstructing justice, China last week choose to come to the rescue of Pakistan yet again when it put on hold a proposal at the UN by the United States (US) and India to blacklist Pakistan-based terrorist Hafiz Talah Saeed, the son of Lashkar-e-Taibah chief Hafiz Saeed. Just a day before that, China had also blocked the listing of Shahid Mahmood, who had been designated by the US in 2016 for facilitating LeT fundraising and support networks. Commenting on these Chinese actions ahead of the Special Meeting of the UNSC Counter-Terrorism Committee (CTC) which will begin in Mumbai today, India’s Ambassador to the UN in New York, Ruchira Kamboj, said, “Terrorism is one of the greatest threats humanity is facing today. On the issue of double standards, we have said there is no good or bad terrorist. Those who propagate this distinction have an agenda and those who cover up for them are just as culpable. There cannot be any justification for terrorism”.

In his analysis of Pakistan’s removal from the FATF grey list, Sushant Sareen, Senior Fellow at the New Delhi based think tank the Observer Research Foundation (ORF), in a 26 October opinion piece titled ‘Pakistan, Terrorism and the Grey Areas of the Grey List’ averred that “Simply put, this was part of a quid pro quo for certain assurances and actions taken by Pakistan to ‘do more’ on issues demanded by global powers — the targeting of slain Al Qaeda chief Ayman al-Zawahiri is believed to be one such deliverable”. He expressed the fear that “On purely objective criteria, while Pakistan has made laws and procedures to beef up the AML/CFT systems, when it comes to terrorism by entities designated to be ‘strategic assets’ of the Pakistani State, these laws and regulations will be observed in their violation. In fact, when the first FATF review happened shortly after Pakistan was grey-listed, the Pakistanis made a big show of taking the necessary legislative and administrative steps to satisfy the FATF. On paper they seemed to have delivered. But when the FATF started delving deeper and asking questions, it turned out it was all an eyewash”.

Sareen, nevertheless, believes that “Despite the Faustian bargain at FATF, the last four years in which Pakistan was made to jump through the hoops prove that pressure, when applied smartly and in a way that it raises costs to a point where persisting with a pernicious policy proves more expensive than the benefit it yields, Pakistan will succumb. That this pressure was lifted somewhat prematurely doesn’t take away anything from the effectiveness of the FATF to force compliance on States like Pakistan”.

With this effectual instrument, at least for the time being, out of the way, going by past experience the world can brace for more mindless terror unless it can muster other potent instruments and ways to deny Pakistan operating space to wield the jihadi weapon.