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Come June, Pakistan will once again be put on the Financial Action Task Force (FATF) grey-list, which consists of countries suspected of financing, or allowing the funding of, terrorist organizations within their territory. While the FATF’s proceedings are confidential, there is much speculation in Islamabad as to why Pakistan is expected to be put on the list. This will not be a first for Pakistan, which has been closely monitored by the FATF at various points between 2009 and 2015. However, this time there has been a lot of domestic backlash over the FATF decision for the following reasons: first, the announcement has been backed by the United States, and that too, against the backdrop of President Trump’s infamous tweet announcing a suspension of military aid to Pakistan. Second, over the years, Pakistan has taken concrete measures to clamp down on terrorism within its territory, such as military operations Zarb-e-Azb and Radd-ul-Fasaad, and has formulated a National Action Plan (NAP) to take quick legal action against militants and fight sectarianism. However, these measures do not seem to have been enough to convince the FATF.

This decision is reportedly based on Pakistan’s inability to curtail the activities of Hafiz Saeed, a United Nations designated terrorist, leader of Lashkar-e-Taiba (LeT), and accused by India of masterminding the 2008 Mumbai terror attacks. However, Miftah Ismail, Pakistan’s de-facto finance minister, has claimed that Pakistan has been a “target of politics” by the FATF while others have argued that this decision was engineered by the United States to put pressure on Pakistan, which is viewed as being “selective” in the fight against terrorism. It seems that Washington is attempting to use Saeed as the basis to push for Islamabad to cut alleged links with militant factions who then wreak havoc in Afghanistan. Thus, Pakistan’s challenge in the next few months would be to counter this narrative of selectivity by inspiring confidence that it will not differentiate between “good” and “bad” terrorists.

U.S. Pushing Narrative of Incompetence

Foreign Office officials are of the view that ever since President Trump announced his South Asia Policy, Pakistan has been continually scapegoated internationally. Behind closed doors, these individuals suggest that the Pentagon has failed miserably in Afghanistan – evident from the fact that an April 2017 report from the Special Inspector General for Afghanistan’s Reconstruction (SIGAR) stated that 40 percent of Afghan territory is under Taliban control, which increased in the January 2018 report allegedly censored by the United States administration. This failure in Afghanistan, Pakistani officials claims, has led to the United States shifting the blame on Pakistan, rather than accepting its own mistakes, and hence the push for this FATF action.

This narrative gains credibility when one considers that Pakistan launched a new military campaign called Radd-ul-Fasaad in 2017 and that international organizations such as Freedom House have commended Pakistan for its recent counterterrorism efforts. Even with regard to Saeed, Pakistan has taken action against him recently, freezing 121 bank accounts and property worth approximately $1 million USD. Similar actions were taken during Pakistan’s last foray on the grey-list between 2012 to 2015, after which increased law enforcement and enhanced vigilance under the aforementioned NAP enabled Pakistan’s removal from the list. This time, the FATF was duly notified about the crackdown, and yet it was not considered sufficient to keep Pakistan off the grey-list.

Contradiction in Counterterrorism Policy

Though U.S. pressure seems to have been a major factor in Pakistan’s grey-listing, some domestic developments certainly added fuel to the fire and may cause further damage to Pakistan’s case between now and June. In February, the Khyber Pakhtunkhwa government raised the grant amount for a seminary run by Maulana Sami ul Haq, known as the Father of the Taliban. It is also known that members of the Haqqani Network’s leadership were educated at this seminary. Additionally, right wing political parties are on the rise in Pakistan, vying for participation in electoral politics: Saeed’s party is already in a legal battle to be registered for the upcoming elections. Should this come to pass, Saeed will be holding rallies across Pakistan for his electoral campaign while the June FATF meeting is ongoing. These worrying developments contradict Pakistan’s counterterrorism efforts and call into question Pakistan’s stance on terrorist safe havens within its territory.

Implications for Pakistan

With the impending FATF grey-listing, some reports suggest foreign direct investment in Pakistan will take a hit. However, citing the last time Pakistan was grey-listed by the FATF, Ismail recalled that stock markets grew by three percent, while the economy maintained its strong foundation as Pakistan was able to take out loans from the World Bank and Asian Development Bank. Since then, Pakistan has improved its economic position in the greater South Asian region through the China-Pakistan Economic Corridor (CPEC), highlighted by multinational corporations such as General Electric and Renault setting up shop within the country. Even if FDI from Western partners goes down, Pakistan will not be heavily impacted since China is its largest source of investment. The finance ministry is confident that Pakistan can weather this storm without it damaging the overall economy further, while the International Monetary Fund (IMF) has also stated that Pakistan’s transactions will not be affected.

However, this is likely to negatively impact the country’s international reputation. Already, questions have been raised domestically over China, Russia, and the Gulf Cooperation Council’s lack of support for Pakistan during the FATF plenary. Such a listing also gives ammunition to countries like India and the United States to discredit Pakistan’s counterterrorism efforts.

The Way Forward

Pakistan has come a long way in the past ten years: militancy has reduced, the economy has grown, and international companies are investing in the country. However, if appropriate measures are not taken in due time, Pakistan is at risk of undoing some of these gains. Wriggling out of this quagmire is important for the image-building of Pakistan, otherwise the narrative propagated by the United States will continue to isolate Pakistan on the global stage. More importantly, it is vital that known terrorism-affiliates not be given political space in Pakistan. To this end, Ismail announced earlier this week that an action plan to combat the FATF’s decision will be ready in time for the June plenary.


Click here to read this article in Urdu.

Image 1: Imtiaz Ahmed via Flickr

Image 2:  Arif Ali via Getty Images

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