Pakistan destined for terror finance blacklist

Pakistan’s bid to curb money laundering and terror financing hit a political wall when the opposition-dominated upper house recently voted down two related bills tabled by the ruling Pakistan Tehrik-e-Insaf (PTI).

The move will thwart Prime Minister Imran Khan’s effort to have Pakistan lifted from a Financial Action Task Force (FATF) grey list of countries tagged as prone to illicit financial activity, and reaffirm perceptions that the country cossets terror groups, their leaders and their financial activities.

The FATF, a Paris-based intergovernmental global watchdog that sets international standards for combating money laundering and terror financing, including in relation to the proliferation of weapons of mass destruction, compiles a rating list of perceived at-risk countries.

FATF blacklisting is fraught with financial dangers, particularly for countries like Pakistan which are dependent on international lending and investment.

Institutions like the International Monetary Fund (IMF) and Asia Development Bank (ADB) exercise extra caution when dealing with nations on the FATF’s blacklist, while ratings agencies tend to downgrade FATF-designated nations.

Soon after the Senate shot down the FATF-related bills, Khan tweeted that the “self-serving interests of the opposition leaders” are at odds with Pakistan’s national interests.

As the international accountability noose has tightened, opposition leaders have become desperate to safeguard their reputed assets gained through corrupt means, including through subversion of parliamentary processes.

Opposition political parties, including Pakistan Muslim League-Nawaz (PML-N) and Pakistan People’s Party (PPP), have argued that the legislation aimed more at tightening the screws on Khan’s perceived political opponents than meeting the FATF’s requirements.

Some allege that Khan’s PTI seeks to gain sweeping powers to arrest anyone suspected of money laundering could be detained without trial for up to 90 days without producing any substantiating evidence in court. The term of imprisonment, they say, could be extended for a further 90 days if authorites deem fit under the proposed legislation.

Khan’s government’s legislators did not consider amendments proposed by the opposition, including a call to scrap the sweeping new powers that would be given to authorities to enforce the law. They also opposed the proposed role of the National Accountability Bureau to investigate cases due to its use as a political tool in the past.

Senator Mushahidullah Khan, a PML-N parliamentarian, said that the opposition merely asked that the government articulate clearly the parameters of the proposed FATF-related legislation, including in regards to the powers authorities would be granted to combat and eliminate money laundering.

“By sweeping the opposition’s proposals under the carpet, the treasury seeks to bulldoze the legislation that is neither demanded by FATF nor aligns with the law of the land,” he said.

Pakistan People’s Party (PPP) senator Farhat Ullah Babar told Asia Times that they didn’t allow the bill to pass because as drafted it would provide de facto legal cover to enforced disappearances to implement FATF recommendations.

“This kind of legislation is neither enforced in any FATF’s member country nor demanded by it. The government just wanted to amass unrestrained power to deal with opponents,” he claimed.

The seasoned politician said that the bills were sent back to the lower house National Assembly, where their fate now hangs in the balance.

Along with Iran and North Korea, Pakistan was placed on the FATF’s grey list in June 2018 for harboring terror outfits and the perceived lack of safeguards against money laundering in the banking and financial sectors.

The global financial watchdog had given an action plan to Islamabad to report total compliance by October 2019 or face the risk of being placed on its blacklist.

In response, and well before the FATF’s deadline, Islamabad submitted a compliance report which came under scrutiny in February during a six-day plenary of the watchdog held in Paris.

In light of the Covid-19 outbreak, the FATF decided against blacklisting the country due to “its political commitment to curb terror financing and money laundering.” However, the FATF noted that Pakistan had implemented 14 recommended points but had failed to enact 13 others.

At the time, the FATF urged the “swift completion of its action plan by June 2020” and called for “significant and sustainable progress especially in prosecuting and penalizing terror financing.”

“If progress is not made by the next plenary scheduled for October, the FATF will take action,” a statement issued by the watchdog in February read. Pakistan was required to submit its final report last month, though it’s not clear that it did.

However, certain action has been taken on the FATF’s call for “targeted financial sanctions against designated terrorists”, including through the seizure of assets and freezing of bank accounts.

The government has taken related actions against Dawood Ibrahim, a mastermind of the 1993 Mumbai blasts, Lashkar-e-Taiba terror group founder Hafiz Saeed, and leaders of the defunct Tehreek-e-Taliban Pakistan (TTP), a terror outfit that attacked a Peshawar army school in 2014, killing over 150 children and teachers.

It has also sanctioned Fazal Raheem Shah of the Uzbekistan Liberation Movement, a terror group associated with the TPP, and Afghan Taliban leaders Jalaluddin Haqqani, Khalil Ahmad Haqqani and Yahya Haqqani. But critics say that list is just the tip of the iceberg of those who should be brought to account.