Pakistan Faces Potential Blacklisting For Financing Terrorism

At a recent Financial Action Task Force (FATF) meeting in Orlando, Florida, United States, Pakistan was under discussion for blacklisting by the organization for failing to curb terrorist financing.  The organization, established by the G-7 in 1989 as a means to combat money laundering, as well as terrorism financing, has been a critical force in combating terrorism in the post-9/11 world.  Although Pakistan is not a member of FATF, its eastern neighbor, India, is and has been pushing for Pakistan to be placed on the blacklist. 

In the eyes of New Delhi, Pakistan has failed to distance itself from terrorist groups, some of which have targeted India, and curb terrorist financing in the country.  Such terrorist organizations include Lashkar-e-Taiba (LeT, which was responsible for the 2008 Mumbai attacks) and Jaish-e-Mohammed (JeM, which claimed responsibility for the Pulwama attack earlier this year).  Such incidents have of course concerned New Delhi and Prime Minister Modi’s government firmly expects that Pakistan will live up to its commitments and completes its action plan items (25 out of 27 which have not been fulfilled thus far) by September or October this year.  India, as co-chair of the joint group of the FATF and Asia Pacific Group (APG), has been at the lead in accusing Pakistan of insufficient progress in reducing terrorism in the South Asian country.

In response, Pakistan has accused India of politicizing the whole situation.  During deliberations, Islamabad hoped that the members would reject India’s “malicious campaign,” regarded by Pakistan as “preposterous” and “unwarranted,” and support its side.  Indeed, there were some countries that lent their support to Islamabad, including China, Turkey, and Malaysia.  Although Pakistan and China have long been strong partners and allies, this is perhaps a curious development given China’s recent decision in May to drop its opposition to a UN blacklisting of Pakistan-based Jaish-e-Mohammed founder Masood Azhar.  It is likely that China chose to sidestep its traditional ally to avoid diplomatic isolation vis-à-vis terrorism and cultivate strong ties with India.  In any case, China, Turkey, and Malaysia’s support to Pakistan have boosted its position with regards to the FATF and temporarily prevented its blacklisting. 

Pakistan’s army chief, Qamar Javed Bajwa, speaking at the London-based International Institute for Strategic Studies (IISS), denounced accusations that Pakistan was failing to combat terrorism and terrorism funding.  “We are doing our best, utilizing all available sources to wipe out the enemies of peace and prosperity but it is fact that peace and stability in South Asia was dependent on the resolution of conflicts and disputes in the region,” Bajwa said.  He further noted that, “We suggest to all countries especially our neighboring nations that come forward and cooperate with each other in wiping out terrorism as it is a common enemy.” 

In terms of other international players, the European Union and the United States have also been insistent that Pakistan fulfill its commitments.  In February, the European Commission placed Pakistan on a list with 22 other countries who have “strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks.”  The countries on this list meet at least one of three criteria: 1) they have systemic impact on the integrity of the EU financial system, 2) they are reviewed by the International Monetary Fund as international offshore financial centers, and 3) they have economic relevance and strong economic ties with the EU. 

During the same month, the EU advised Pakistan to undertake “clear and sustained actions targeting not only all UN-listed transnational terrorist groups but also individuals claiming responsibility for such attacks.”  There has been close contact and cooperation between the EU and India, evidenced by their annual Counter Terrorism Political Dialogue, which was held last November in Brussels.  Furthermore, the EU Ambassador to India, Tomasz Kozlowski has affirmed Brussels’ desire to strengthen this dialogue and support India in its counter-terrorism efforts.  Indeed, with Pakistan still on the grey list, it faces the threat of reducing much-needed European investments into the country. 

The United States—for its part—has also been putting pressure on Islamabad to change its behavior.  Earlier this month, a senior White House official told the Press Trust of India, “What the United States is really looking for in Pakistan are arrests and prosecutions and not allowing these groups to operate and move around freely, acquire weapons, cross into India, carry out attacks.”  He further stated, “Until these groups are put out of business, it’s going to be very difficult for India and Pakistan to achieve a sustained peace.  So the onus is on Pakistan to ensure that they crack down on these groups.” 

In addition, Washington has employed the carrot in order for Islamabad to receive IMF loans that will boost an already struggling economy.  With the largest share of voting rights in the Washington-based institution, and typically able to rely on its Western European allies who themselves hold sizable voting rights, the United States holds sway in how IMF loans are distributed.  Until Pakistan fulfills its FATF commitments, the IMF will not be given the green light by the Trump administration to authorize and sign the loan program agreement.  Furthermore, unlike previous administrations, the Trump administration will not provide waivers and extend any relief to the government.  Thus, the Pakistani government will have to pass through two hoops (first the FATF, then the IMF) in order to avoid being on the blacklist and receive the much-needed loans. 

Moving forward, it is critical that India and Pakistan assuage each other’s fears over this matter.  Although decoupling Pakistan from its complex, entrenched web of terrorist organizations will be a herculean task, both countries must remain committed to peace and security in the region.  With ongoing peace talks with the Taliban taking place up north and a potential conflict in Iran to the west, both countries cannot afford to maintain this diplomatic impasse.  Both countries should work together in resolving border disputes and concentrating their efforts on counter-terrorism.  As members of the Shanghai Cooperation Organization, one of whose primary objectives is to combat terrorism, India and Pakistan should focus their attention on this mutual threat.  With such cooperation, Pakistan can remove itself from this diplomatic and economic quagmire and perhaps be on the right trajectory towards peace and prosperity. 

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