Pakistan’s Finance Minister Asad Umar has written to the president of the Financial Action Task Force (FATF) asking that India be removed as co-chair of the FATF’s Asia-Pacific Joint Group (APJG), which is reviewing Islamabad’s progress on action against terrorist financing. A delegation of the APJG, which is a regional association of the FATF, is scheduled to reach Islamabad on March 24, and following a review over the next two days, submit its report to the FATF.
Umar wrote to FATF president Marshall Billingsea that “India’s animosity towards Pakistan is well-known and the recent violation of Pakistan’s airspace and dropping of bombs inside Pakistani territory was another manifestation of India’s hostile attitude.” He asked FATF to appoint any other member country as co-chair “to ensure that the review process is fair, unbiased and objective”.
The FATF was established in July 1989 by a G-7 Summit in Paris to examine and develop measures to combat money laundering. In October 2001, it expanded its mandate to incorporate efforts to combat terrorist financing as well. The FATF’s objectives are “to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system”.
The FATF monitors the progress of members and non-members in implementing the FATF Recommendations, “a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction”. It identifies jurisdictions with “weak measures to combat money laundering and terrorist financing (AML/CFT) in two FATF public documents that are issued three times a year”.
The FATF’s decision-making body, the FATF Plenary, meets three times in Paris between July and June — usually in October, February and June. The FATF’s 38 members (36 member jurisdictions and two regional organisations, the European Commission and Gulf Cooperation Council), two observer jurisdictions (Indonesia and Saudi Arabia), and multiple observer organisations (mainly international banks and law enforcement bodies) attend the Plenary. India is an FATF member; Pakistan is not.
APJG is a working group that functions under the FATF, and is not to be confused with the Asia/Pacific Group (APG) headquartered in Sydney, Australia. The APG is the largest of nine FATF-Style Regional Bodies (FSRBs) whose 41 members include both India and Pakistan. Eleven of these members are members of FATF as well. India became a member of the APG in March 1998; Pakistan in May 2010.
The APG examines AML/CFT efforts of members countries every 10 years. Pakistan will be reviewed in 2019-20. “While FATF will look into the 26-point action plan, APG will hold a separate review,” an Indian official said.
In 2018, FATF approved the nomination for monitoring of Pakistan under its International Cooperation Review Group, commonly known as the ‘grey list’. The resolution against Pakistan was moved by the US, and supported by the UK, France, Germany, and India. It said Pakistan was not doing enough to comply with anti-terrorist financing and anti-money laundering regulations.
In June 2018, Pakistan submitted a 26-point action plan to the FATF, committing to implement it over the next 15 months. The action plan included a squeeze on the finances of Jamaat-ud Dawa, Falah-i-Insaniyat, Lashkar-e-Taiba, Jaish-e-Mohammad, Haqqani Network and the Afghan Taliban. The failure to negotiate the action plan could have led to Pakistan being blacklisted.
In January 2019, the FATF decided to keep Pakistan on the grey list, based on a review that concluded that the country had made “limited progress” in curbing money laundering and terrorism. Expressing dissatisfaction, FATF said Pakistan could “not demonstrate a proper understanding of the terror financing risks posed by Daesh (ISIS), al-Qaeda, Jamaat-ud-Dawa, Falah-i-Insaniyat Foundation, Lashkar-e-Taiba, Jaish-e-Mohammad, Haqqani Network, and persons affiliated with the Taliban”.
Whether Pakistan remains in the grey list or is placed in the black list will be clear by October 2019. Pakistan was on the FATF watchlist between 2012 and 2015 as well, but only for money laundering.
What happens now
Officials said it was unlikely that Pakistan’s complaint against India to the FATF would have an impact. Pakistan is not a member of FATF; India, on the other hand, has been an active member in the FATF and in its various sub-groups after 2013 following New Delhi’s effort to introduce changes to the AML/CFT systems and laws. In June 2013, the FATF recognised that India had made significant progress in addressing deficiencies identified in its mutual evaluation report, and decided that it should be removed from the regular follow-up process.
India has been lobbying hard with the US for the strict monitoring of Pakistan, and highlighting the funding of terrorist activities by that country. India has in the past provided evidence of the involvement of Pakistani officials in peddling fake currency, and planning attacks on Indian assets on foreign soil.