Global financial watchdog FATF placed Pakistan on its 'grey list'. During a plenary meeting in Paris. Pakistan had failed to act against terror financing on its soil: FATF

by Geeta Mohan

In a blow to Pakistan, global financial watchdog, FATF placed Pakistan on its 'grey list' during a plenary meeting in Paris, arguing that Pakistan had failed to act against terror financing on its soil.

While the decision to place Pakistan on the list was taken in February this year, Islamabad was asked to submit an action plan as to what she will do to curb terror financing and increase her counter-terrorism efforts.

In exclusive details that India Today has accessed, Pakistan in its 26-point action plan launched a concerted diplomatic onslaught to avert the 'grey listing'.

The 26-point action plan was divided into four broad categories: 1. Improve regulatory performance, 2. Improve cross-border controls, 3. Improve legal provisions and 4. Improve enforcement of all US designated entities under UNSCR 1267 and 1373.

India Today has learnt that, Pakistan, under the fourth category named global terrorists Hafiz Saeed, his son Talha Saeed, Zaki-ur-Rehman Lakhvi, et al. This is a significant development since Pakistan not only promised to improve enforcement but also promised "prosecution" of the said individuals.

The list also includes terrorist organisations Lashkar-e-Taiba (LeT), Jamaat-ud-Dawaa (JuD), Falah-e-Insaniyat (FiF), Jaish-e-Mohammad (JeM), apart from ISIL/Daesh/IS, Al Qaeda, Taliban. The Pakistani side promised freezing of all properties and financial resources.

Pakistani delegation was led by Finance Minister Dr Shamshad Akhtar who represents the caretaker government in place in Pakistan, along with senior officials from Pakistani Interior Ministry and Foreign Office. Dr Akhtar urged the FATF to withhold the decision of putting Pakistan on the 'grey list' since Pakistan was making efforts and the new government in Pakistan should get a chance to prove itself as the country goes to polls on July 25 this year.

In another major development, unlike in February, Pakistan's all-weather friend China did not object to the grey listing of Pakistan at the plenary. The Indian delegation did face some hurdles in ensuring that everybody was onboard the decision, but tough one-on-one negotiations helped ensure consensus.

Although China did try to stand by Pakistan in solidarity when during the media briefing on Friday spokesman Lu Kang said, "We will not make comment on the decision of the task force. But we understand Pakistan has made enormous efforts for the counter-terrorism and made great sacrifices."

In February 2018, the FATF adopted its second counter-terrorist financing operational plan of action, which provides a framework for a flexible and dynamic response to terrorist financing threats.

FATF's role in leading global efforts in this area was highlighted at the international conference on tackling the financing of terrorism, "No Money for Terror", at the initiative of French President Macron, which took place in Paris on 25-26 April 2018.

Improving the identification and understanding of terrorist financing risks remains a core element of the FATF's strategy and delegates discussed ongoing work in this area, including the review of risk, threats and vulnerabilities associated with crypto-assets, and an update on the financing methods employed by ISIL, AQ and affiliates.

The FATF was not convinced with Pakistan's arguments to put its decision of grey listing them on hold. Instead, the global financial watchdog came out with a 10-point agenda for Pakistan to ensure implementation of its "action plan" by showing "high-level political commitment" to work with the FATF and APG to strengthen its AML/CFT (anti-money laundering and combating the financing of terrorism) regime and to address its strategic counter-terrorist financing-related deficiencies.

The FATF in its documents listed out the objectives for Pakistan as following:

(1) Demonstrating that TF (terror financing) risks are properly identified, assessed, and that supervision is applied on a risk-sensitive basis;
(2) Demonstrating that remedial actions and sanctions are applied in cases of AML/CFT violations and that these actions have an effect on AML/CFT compliance by financial institutions;
(3) Demonstrating that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services (MVTS);
(4) Demonstrating that authorities are identifying cash couriers and enforcing controls on the illicit movement of currency and understanding the risk of cash couriers being used for TF;
(5) Improving inter-agency coordination including between provincial and federal authorities on combating TF risks;
(6) Demonstrating that law enforcement agencies (LEAs) are identifying and investigating the widest range of TF activity and that TF investigations and prosecutions target designated persons and entities, and persons and entities acting on behalf or at the direction of the designated persons or entities;
(7) Demonstrating that TF prosecutions result in effective, proportionate and dissuasive sanctions and enhancing the capacity and support for prosecutors and the judiciary; and
(8) demonstrating effective implementation of targeted financial sanctions (supported by a comprehensive legal obligation) against all 1267 and 1373 designated terrorists and those acting for or on their behalf, including preventing the raising and moving of funds, identifying and freezing assets (movable and immovable), and prohibiting access to funds and financial services;
(9) Demonstrating enforcement against TFS violations including administrative and criminal penalties and provincial and federal authorities cooperating on enforcement cases;
(10) Demonstrating that facilities and services owned or controlled by designated persons are deprived of their resources and the usage of the resources.

Being placed on the 'grey list' means Pakistan would have to bear a huge economic cost with Pakistan's financial system designated as posing a risk to the international financial system because of "strategic deficiencies" in its ability to prevent terror financing and money laundering.

Pakistan will now be directly scrutinised by the financial watchdog until it is satisfied by the measures taken to curb terror financing and money laundering.

Countries that fell under the list "Jurisdictions with Strategic Deficiencies" are: Ethiopia, Pakistan, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Yemen; and the ones who were off the list, "no longer subject to the FATF's on-going global AML/CFT compliance process" were Iraq and Vanuatu.