Pakistan expects to avoid ‘terrorism’ financing blacklist

With longtime ally China providing diplomatic cover, Pakistan is confident it can avert being blacklisted by a global watchdog group over “terrorism” financing on Friday.

But the country will not be completely off the hook until Islamabad proves it is genuinely severing ties with various groups of fighters, say officials and analysts.

The Financial Action Task Force (FATF) – the Paris-based intergovernmental organisation that combats money laundering and “terrorism” financing – last year placed Pakistan on a grey list of countries with inadequate controls.

During its five-day meeting, FATF will decide on Friday whether to retain that designation, or blacklist Pakistan alongside Iran and North Korea.

If blacklisted, Islamabad faces financial consequences and economic setbacks at a time when its economy is facing a balance of payments crisis.

“The main challenge for Pakistan is to convince the FATF that it is taking complete and irreversible steps against terrorist financing,” said Michael Kugelman, the deputy director of the Asia Program at the Wilson Center think-tank.

Pakistan, which blames archrival India for lobbying to blacklist it, is relying for support on friendly countries like China, as well as Turkey and Malaysia.

Three votes are mandatory for any country to escape the blacklisting, and China is presiding over the ongoing FATF plenary in France.

Two top government officials and a security source told the Reuters news agency that in a recent visit to Beijing, Pakistan’s civil and military leadership secured a guarantee from Chinese leaders that Pakistan would not be placed on the blacklist.

‘Taken very real steps’

“God willing, we’re trying that we get out of this grey list as soon as possible, and I think you should believe that a comprehensive effort is being put in place,” Pakistan’s Minister for Finance Abdul Hafeez Shaikh told a news conference over the weekend.

But if Pakistan does avert blacklisting, it will be just temporary relief until the FATF meets again in February 2020.

Ahead of the current plenary, the watchdog’s Asia/Pacific Group on Money Laundering (APG) issued a critical report on progress made by Islamabad since last year.

Of the 40 recommendations, the report said that Pakistan fully complied with only one, largely complied with nine, partially complied with 26, and totally missed four parameters – which were mandatory if Islamabad wanted to be removed from the grey list.

The report said Pakistan should adequately identify, assess and understand risks associated with fighters operating in Pakistan such as the ISIL group, al-Qaeda, Jamaat-ud-Dawa (JuD), Lashkar-e-Taiba and Jaish-e-Mohammed (JeM), which continue to raise funds openly.

Islamabad says it has acted to seize the groups’ assets, and has put on trial the entire leadership of JuD – including its chief, Hafiz Muhammad Saeed, the alleged mastermind of the 2008 Mumbai attacks that killed 166 people.

“My sense is that Pakistan has taken very real steps against terrorist financing, but so long as the state retains ties to militant groups, concerns will remain within FATF about Islamabad’s genuine commitment to act conclusively,” the Wilson Center’s Kugelman said.

Pakistani analyst Ayesha Siddiqa said Pakistan was unlikely to completely abandon its proxies any time soon.

“I would start believing [it] when JeM infrastructure gets downsized, its leader Masood Azhar is publicly arrested and put on trial,” she told Reuters.

“With Afghanistan still brewing, I don’t think we are close to cleaning our house.”