Financial Action Task Force commonly known as FATF was established in 1989 with the aim of discouraging terror financing, money laundering and other similar threats that can pose a potential threat to the world in terms of looted and illegal money transactions. The composition of FATF consists of two separate but interrelated lists called grey list and blacklist. Pakistan has been on the Grey list before during 2012-2015. In its recent meeting on 28th June 2018 at Paris the country was placed again on the list by describing somewhat similar facts. For example, the country did not take concrete measures to counter ‘’financing of terrorist’’ from her soil, frequent money laundering and structural deficiencies in its anti-money laundering law (AML).
Many of the analysts might consider this ‘’a step in the right direction’’ which is not a true picture of the story. Let’s break it down to analyze whether the FATF action against Pakistan is a rational step on not.
Starting with the factual data, the Basel Institute of governance disclosed its anti-money laundering index 2017. According to the report, Pakistan ranked at 46th place out of 146 countries that were evaluated on the basis of their efforts and laws to counter money laundering. Common sense suggests that 45 countries are on the upper side of Pakistan making them more disclosed to such illegal practices. But the irony is that very few from them are placed on the Grey list. Take the case of Afghanistan which is at number 2 out of 146 countries is not placed on any list. So despite taking a rational and factual action, FATF decision fallowed favoritism policy in its approach in taking decisions of fragile nature.
Moving on, Pakistan submitted her 26 point plan of action to FATF-ICRG (international cooperation review group) before the deadline given by the review group. Despite this, the decision was taken against the country. The committee should have considered the political situation of the country at that time as there was a caretaker government at the Islamabad which cannot take any policy decision of specific nature. Without considering the fact, the FATF committee opted for the decision of placing Islamabad on the Grey list which came as surprise to Pakistanis.
The best possible way perhaps would have been a consensus among all the stakeholders. The country’s newly elected government should have been given some time to revise the policy regarding anti-money laundering and terror financing. As the PM Imran Khan’s political agenda was based on this issue that he will bring the looted money and will strengthen the laws regarding anti-money laundering and terror financing.
Now, as the decision is in place; the already fragile economy of Pakistan may face multiple challenges ranging from adverse impacts on Pakistani banks, relatively bad impact on import, export, remittances, and access to international lending’s. It may disrupt the balance of payment. In such a scenario, the end result might be against the wishes of the international community which will do harm to Pakistan in particular and the world in general.
