Going Grey: FATF and Pakistan’s Strategic Considerations

The global anti-money laundering Financial Action Task Force (FATF) will be meeting in June, where Pakistan is set to be added to the FATF grey list of countries. This grey list consists of countries that have strategic deficiencies in anti-money laundering and combating the financing of terrorism (AML/CFT). Now, Pakistani authorities must convince the FATF that they have prepared an action plan to curb money laundering and combat terrorist financing in the country. Failing this, Pakistan could be placed on the “blacklist” alongside Iran and North Korea. This will further isolate Pakistan in the international community, with a negative impact on its financial sector.

Pakistan’s History with the FATF  

In a February 2018 FATF plenary session in Paris, the United States, Britain, France, and Germany floated a proposal to place Pakistan on a watch list of countries considered non-compliant with global anti-terror financing measures. Pakistan’s allies China, Turkey, and Saudi Arabia, representing the Gulf Cooperation Council (GCC), opposed this proposal in the first session, but overturned their decisions by the final round. Since then, rumors have surfaced suggesting the United States successfully convinced China and Saudi Arabia to support their proposal. For Pakistan, this reneging on the part of traditional allies China and Saudi Arabia was seen as a strategic setback, as this effectively sent a message to Pakistan to crackdown on terrorist groups and individuals listed by the United Nations Security Council (UNSC).

Placing Pakistan on the watchlist once again will further damage its international reputation, where Pakistan will not only become known for alleged state sponsorship of terrorism, but will also be isolated globally, from allies and rivals alike.

Placing Pakistan on the FATF grey list is part of the U.S. strategy to increase pressure on Pakistan to cut its alleged ties with militant groups operating in neighboring Afghanistan and Indian administrated Kashmir. The United States’ major concern is Pakistan’s suspected support of Afghan militant groups waging war in Afghanistan, that then threatens the United States’ national security interests in the region. To this end, in January, the United States suspended at least $900 million (USD) in security aid to Pakistan due to its failure to crack down on the Afghan Taliban and the Haqqani Network, to whom the United States alleges Pakistan provides safe haven.

However, Pakistan denies these charges, especially given that Pakistan had been placed on the FATF grey list before this, in 2012, but removed in 2015 when Pakistani authorities were able to provide sufficient evidence as to counterterrorism measures in compliance with external regulations. Placing Pakistan on the watchlist once again will further damage its international reputation, where Pakistan will not only become known for alleged state sponsorship of terrorism, but will also be isolated globally, from allies and rivals alike.

Ambiguous Counterterrorism Strategy

Pakistan has mainly relied on militant groups for their strategic interests in Afghanistan and Indian administered Kashmir in the post-Cold War era. After 9/11, the United States increased pressure on Pakistan to take strict actions against militant groups in the country. Subsequently, General Musharraf cracked down on militant groups, banning the Lashkar-e-Jhangvi, Sepah-e-Muhammad Pakistan, Jaish-e-Muhammad, and Lashkar-e-Taiba, to name a few. In addition, prominent leaders of religious political parties, such as Fazl-ur-Rahman and Qazi Hussain Ahmed, were arrested due to their anti-U.S. invasion protests.

Naturally, there was internal opposition to then-President General Musharraf’s revised Kashmir policy and apparent agreement to work at the behest of the United States and other western countries. However, in 2004, General Musharraf clarified that, “Pakistan has two vital national interests: being a nuclear state and the Kashmir cause.” This came as reassurance to the military and other ethnic and religious groups that Pakistan’s core policies had not been abandoned: rather, certain adjustments were being made to regain and maintain the United States’ trust and support.  Consequently, such outlawed groups resurfaced when external pressures receded, with some resuming activities under new names. This implies that there was no major strategic change in the Pakistani policy towards militancy post-9/11.

In this context, it can thus be argued that the crackdown on militant outfits was a face-saving exercise on the part of the Pakistani military, to show to the United States—and the world—a sincere effort in the global war on terror. The leadership of such groups were asked to keep a low profile until the situation had eased and then they would be allowed to restart their activities. Since then, the state has continued with this approach, taking action against militant groups when international pressure to do so increases, but softening its policies when the pressure is reduced.

Measures Taken Thus Far

According to Foreign Secretary Aizaz Chaudhry, “The principal international demands are for action against Masood Azhar and the Jaish-i-Mohammad; Hafiz Saeed and the Lashkar-e-Taiba; and the Haqqani network.” In September 2017,  BRICS member countries declared that the terror outfits Pakistan is allegedly harboring are threatening regional security, while earlier this year, the UNSC released an updated list of terrorist individuals and entities in which 139 entries are operating out of Pakistan, including Al-Qaeda chief Ayman-al-Zawahiri and Lashkar-e-Taiba leader Hafiz Saeed.

So far, though, Pakistan has not seemed to live up to the international community’s expectations. In December 2017, Pakistan had prepared a plan to seize the assets of the Falah-e-Insaniat Foundation, but instead released its leader Hafiz Saeed from house arrest in earlier November 2017. Moreover, on June 8th, 2018, the National Security Council meeting was held in which the civil-military leadership had “expressed satisfaction over the progress made so far to comply with the FATF framework.” Pakistan often claimed its success and sacrifices in the “war on terror” in the northwest of Pakistan by clearing the areas from militancy. Still, with FATF grey-listing hanging over its head, Pakistan must bear in mind that it is the international community’s standards that it must satisfy to avoid penalization. At present, it appears that Pakistan failed to convince the FATF member states that it has taken considerable actions under AML and CFT.

What Comes Next?

Pakistan should present a clear roadmap in the next FATF meeting that they will guarantee to eradicate the militant groups from its soil who are waging war in the neighboring countries.

In this situation, there has been growing international pressure on Pakistan to make a strategic decision to crack down on internationally-recognized terror groups and affiliated individuals. Pakistan being placed back on the FATF grey list means that its ambiguous counterterrorism policy regarding militant groups may not work in future. Pakistan should present a clear roadmap in the next FATF meeting that they will guarantee to eradicate the militant groups from its soil who are waging war in the neighboring countries. More specifically, Pakistan will have to take strict actions against Haqqani Network, Lashkar-e-Taiba, and the Taliban and its affiliated militant groups. Failing this, the strategic diplomatic space will further shrink and Pakistan may be placed on the “blacklist,” a result that would only add to Pakistan’s problems.


Image 1: Shahzeb Younas via Flickr

Image 2: BotMultichillT via Wikimedia Commons

Posted in , Afghanistan, BRICS, Cooperation, Defence, Foreign Policy, Geopolitics, Human Security, Internal Security, Militancy, Pakistan, Terrorism, Uncategorized

Arshad Ali

Arshad Ali is a PhD student at Department of Politics in University of Otago, New Zealand. Previously, he worked as a Research Analyst at the International Centre for Political Violence and Terrorism Research (ICPVTR), Singapore and Institute of Strategic Studies, Islamabad.

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One thought on “Going Grey: FATF and Pakistan’s Strategic Considerations

  1. Arshad,
    Many thanks for contributing to SAV.
    Every outgoing democratically elected civilian government leaves an economic mess for its successor. And now this.
    As long as the powers that be seek to accommodate militant groups without imposing constraints on their external behavior, Pakistan will remain susceptible to such penalties.
    The question we often avoid is whether it is feasible to seek to impose constraints on external behavior. The standard Pakistani answer is that this remains feasible, but will require a long game. How true is this?

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