After four years of relentless scrutiny, Pakistan is finally off of the Financial Action Task Force’s (FATF) inglorious “grey list.” FATF is a global money laundering and terrorism financing watchdog. Due to shortcomings in its legal, financial, regulatory, investigations, prosecution, judicial, and non-government sectors to combat money laundering and combat terror financing, Pakistan was added to FATF’s grey list – jurisdictions subject to “increased monitoring” – in June 2018.
This move by FATF comes as a sigh of relief for Pakistan, which is struggling with intersecting economic, political, and climate catastrophes. Nonetheless, its exit from the grey list should not distract the government and institutions from continuing to create a society free from corruption and money laundering.
While on the grey list, Pakistan was subject to perhaps the most challenging and comprehensive action plan ever given to any country. It was also subject to dual evaluation processes of FATF with differing timelines. As per the official FATF report, overall, Pakistan has made good progress in addressing the technical compliance deficiencies identified in its Mutual Evaluations Report (MER). As a result, Pakistan has been re-rated on a few recommendations and is now either “largely compliant” or “compliant” on 38 FATF recommendations, which is enormous progress.
Pakistan’s difficulties regarding corruption and money laundering are the result of multifaceted, deep-rooted problems and miscalculations. For the same reasons, efforts to establish any holistic, effective management to counter these severe issues were weak and flawed. Though the FATF grey listing had its political undercurrents, it was a blessing in disguise for Pakistan’s nearly nonfunctional legal framework to counter money laundering and terrorism financing, both of which are important interest for Pakistan itself.
In light of the grey listing, Pakistan rigorously overhauled its entire legal system, exerting a focused institutional reform process and capacity building to handle terrorism financing. The government also thoroughly worked on strengthening the financial, regulatory, investigatory, judicial, and prosecution frameworks, as well as participation by the non-government sector. Pakistan made significant progress in addressing many legal loopholes and targeted militant groups of concern to FATF.
In an upcoming edited volume, “Countering Terrorist and Criminal Financing,” I contributed a chapter critically analyzing Pakistan’s counterterror and terrorism financing measures. It highlights the actions taken to prevent the flow of terrorism funding and how Pakistan is countering terror financing and organized crime by engaging with national and regional partners.
In the wake of its delisting, Pakistan should not lose its momentum. Islamabad should keep improving the terror financing investigation process and the capacity building of the involved institutions. There has been a significant improvement in the legal sector, but some efforts are still required to make it more effective. There is a need to invest in the capacity building and practical training of the judiciary, law enforcement agencies (LEAs), judges, lawyers, prosecutors, police, and investigators, and other actors involved in the investigation process. LEAs need to be better equipped, and more software-based analytical tools and technical gadgets should be inducted to improve the efficacy of the entire process. Mass-scale inspections and audits of NGOs, charity organizations, seminaries, and fundraising events should be done. Stringent non-discriminatory regulations in implementation of the laws are required. Otherwise, the entire effort will be unproductive and can even prove counterproductive in the future.
Evading FATF listing should not be Pakistan’s end goal. Instead, strengthening the institutions and the timely implementation of measures to counter money laundering and terrorism financing for the country’s overall peace, stability, and progress should be the priority. The developments over the last few years proved fruitful and constructive, particularly for the criminal justice system.
This grey list exit should help encourage future efforts, as the government still needs to analyze what steps have worked so far and what amendments are necessary for the future. Pakistan still has to track down people involved in corruption and money laundering, as money from Pakistan should not be used in any criminal activity outside or inside the country, nor should it end up in foreign accounts.