FATF and the case of Pakistan; Structural Deficiencies or Structural Inequalities?| Nadia Satti Rationale-47

Nadia Satti

The placement of North Korea and Iran in blacklist and not removing Pakistan from Grey List becomes a matter of suspicion in the eyes of international actors, whether FATF is really a global watchdog on anti-money laundering or is it a tool of exploitation for developing countries? Whether there exist structural deficiencies or global political objectives are pursued under the holy cloak of financial surveillance? It is a question that is looming over the political cloud in the international political cosmos.

Financial Action Task Force is an intergovernmental body which acts as a global watchdog governing internationally the matters related to anti-money laundering and countering the finances of terrorist organizations and groups. The body became officially functionalized in 1989. The September 11, Twin Towers attack in Washington were a turning point in the international political theater and thus enhanced the cooperation among states and regional bodies to combat the terrorism all across the globe. The hastening decline of American dream and its prestige in the aftermath of 9/11 awakened the international community and set up Mise-en-scène for the increased operationalization of FATF. The primary objective of FATF was to target the cases of terror financing but gradually its scope was enhanced and the matters related to money laundering were also incorporated.

This intergovernmental decision and policy making body sets up benchmark and international standards to combat terrorism and illegal transaction of capital. Under the contemporary status, FATF comprises of 37 members’ jurisdiction and two regional bodies.

FATF Blacklist:

The countries which are deficient in the anti-money laundering and countering the financing of terrorist organizations, fall under the category of FATF Blacklist. It is often referred as High Risk Jurisdictions Subject to Call for Action. The countries on the blacklist of FATF are subject to economic sanctions, and various other prohibitive measures are adopted for these non-cooperative countries. Presently, two countries North Korea and Iran are put on blacklist of FATF.

FATF Grey list:

Unlike Blacklist, the countries on Grey list are not non-cooperative but have committed to the standards and benchmarks of FATF, and require increased monitoring. It is also called as Jurisdictions under Increased Monitoring. Their functioning and conformity to the standards of FATF are accessed either via FATF regional bodies or other institutional mechanisms. The countries on the grey list are also subject to economic sanctions which are less severe in nature than that of blacklist. Albania, Botswana, Cambodia, Ghana, Iceland, Jamaica, Mongolia, Mauritius, Nicaragua, Panama, Pakistan, Syria, Uganda, Yemen and Zimbabwe are on the grey list of FATF.

Both Blacklist and Greylist of FATF are updated regularly and countries which develop effective mechanism and legislation to combat anti-money laundering and terror financing are removed from either of the two lists.

Pakistan’s Case

In 2008, Pakistan was placed on the greylist due to lack of infrastructure regulation to counter the financing of terrorism. It was directed to confiscate the assets of terrorist organizations and target their channels of funding. In 2012 plenary meeting of FATF met where Pakistan failed to come out of greylist. However, in 2015 Pakistan was removed from the gerylist. The 2018 plenary meeting of FATF again put the country into greylist due to the pressure of United States, European countries and India. India and US lobbied to undermine the position of Pakistan and accused of its involvement into various terrorist activities of Al-Qaeda, Lashkr e Jhangwi and other terrorist organizations.

The February 2021 plenary meeting of FATF initiated a new discourse in the international political milieu that Pakistan is going to stay on grey list of FATF till June 2021. The plenary meeting of Paris-based global watchdog on AML/CFT urged Pakistan to address the remaining 3 action plans (out of 27) to come out of grey list. The case of Pakistan has been hanging like the sword of Damocles since long. The concluding remarks of the plenary meeting elucidate that there are structural deficiencies in country that are an impediment in the completion of action plans.  

The game of hide and seek being played with Pakistan in the retrospect, and lobbying of various countries against Pakistan suggests a biased and discriminatory behavior of FATF. Despite making progress in all the major areas of terror funding, anti-money laundering and arrest of LeT, JeM and JuD activists, the internationalized standards of FATF are subject to be scrutinized crucially. The imposition of sanctions, conditions and loan barriers intensifies the inequality which is persistent within FATF. The standards and benchmarks of FATF are prejudiced against developing countries. Ironically, the countries accused of illicit financial flows which are on grey list are all developing countries. The gap of developed and developing countries and the hegemony of big powers persist even in the internal structure of FATF.  Pakistan, being on grey list implies a reduction in international trade, economic sanctions and problems in getting loans from IMF and World Bank. These implications crumble the already crumbling economy of Pakistan in the midst of COVID-19. The IMF loan allocation mechanism to Pakistan is directly linked with the conditionalities of FATF, which brings into light the question that

How under such harsh conditionalities the developing countries will be able to combat the ongoing crisis of pandemic? On one hand, the hymn of sustainable development and uplifting the third world are sung, and On the other hand, structural inequality and prejudice is cultivated and contrived.

Moreover, the internal politicization of FATF and debauchery by Pakistan’s staunch allies China and Saudi Arabia suggest that the stage of FATF has become a depiction of realpolitik theatre. The lobbying of big powers (which depict their hegemony) India, France, US and other international organizations against Pakistan questions the transparency and fairness of FATF. Not to ignore the fact that wheel steerers of FATF tagged North Korea and Iran as rogue states and they are put on blacklist. This leaves a loophole and questions the sanctity of FATF.

Undoubtedly, the lack of support in FATF is a diplomatic failure of Pakistan that even the strongest of its allies did not stand with it. Pakistan needs to work in the area of legislation, its regulation and implementation to get whitelisted, but the international political scenario and politicization of FATF will further determine the standing of Pakistan in FATF. The question is that If Pakistan works on its structural deficiencies (as said by FATF), will internal politicization and structural inequality of FATF still persist or it will perish?

About The Author
Nadia Satti is a student of International Relations at Quaid-i-Azam University, Islamabad. She is interested in Foreign Policy Analysis and Diplomacy particularly through the prism of First World and Third World Perspectives. She tweets @NadiaKSatti1

The views expressed in this article are solely those of the original author and do not necessarily reflect or represent the views of Rationale-47. 

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