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Journalism of Courage
WHY NOW?
Following the Pahalgam terror attack, which led to the deaths of 26 people last month, India announced multiple measures in response to Pakistan’s role. As part of the strategy to curb financial flows that aid terror activities, it is planning to bring back Pakistan into the ‘grey list’ of the Financial Action Task Force (FATF), two people in the know told The Indian Express.
The FATF is commonly referred to as the world’s “terrorism financing watchdog”, which means it is the author and custodian of an international regime that works to ensure that the flows of money in the global financial system are not misused to fund terrorist activities.
It maintains a “grey list” of countries that it watches closely, including the ones who have failed to prevent international money laundering and terrorist financing. Currently, it includes Nepal, Lebanon, South Africa, Syria and Vietnam, among others.
Countries have to comply with certain conditions laid down by the FATF, failing which they run the risk of being “black listed” by the watchdog. FATF conducts periodic assessments.
In June 2018, when it was first grey-listed, Pakistan made an international commitment at the highest political level that it would “work with the FATF to strengthen its AML/CFT regime, and to address deficiencies in its counter-terrorist financing-related actions”. “AML/CFT” is FATF jargon for “Anti-Money Laundering/Combating the Financing of Terrorism”.
On October 21, 2022, the FATF announced that “Pakistan has strengthened the effectiveness of its AML/CFT regime and addressed technical deficiencies to meet the commitments of its action plans regarding strategic deficiencies that the FATF identified in June 2018 and June 2021”. It then came off the list.
In an official statement, India noted at the time that “as a result of FATF scrutiny, Pakistan has been forced to take some action against well-known terrorists, including those involved in attacks against the entire international community in Mumbai on 26/11”. However, it added, “It is in global interest that the world remains clear that Pakistan must continue to take credible, verifiable, irreversible and sustained action against terrorism and terrorist financing emanating from territories under its control.”
At the time, the Pakistani daily Dawn had said that “If removed from the [grey] list, Pakistan would essentially receive a reputational boost and get a clean bill of health from the international community on terrorist financing.” There is research that suggests grey-listing negatively impacts the relationship of the concerned countries with international funders, including banks and financial institutions that take note of FATF rankings, as well as existing and potential overseas investors in those countries.
To initiate a nomination process demanding a ‘grey list’ status for Pakistan, India would require the support of other FATF member countries. India is also considering raising objections against Pakistan at the upcoming meeting of the board of the International Monetary Fund (IMF) in May.
