FATF grey list implications
Like always, we are
told that ‘poor us’ have once again been a victim of the US and Indian
conspiracy
As
if domestic political crisis was not enough, Pakistan has been hit by the
Financial Action Task Force (FATF). The lame duck government which is tottering
to complete its last few months is telling us that they have got a respite of
three months before they are put on the black list (FATF). After a lot of
confusion they have hesitantly accepted that Pakistan has been put on the grey
watch list in the Paris (FATF) moot.
Like
always we are told that ‘poor us’ have once again been a victim of the US and
Indian conspiracy. At the same time the government is putting up a brave face
and telling the people not to worry about being put on the grey list. We have
been through this slippery path before in 2008 and 2012. But what worries the
analysts is that this time we have been put on the watch list on the insistence
of the US which is following a hostile policy towards Pakistan in collaboration
with India.
“FATF
develops and promotes policies to protect the global financial system against
money laundering, terrorist financing …. The FATF Recommendations are
recognised as the global anti-money laundering (AML) and counter-terrorist
financing (CTF) standard”.
Although
Pakistan has made rules and regulation to comply with FATF guidelines on
piece-meal basis, but as in all the cases its implementation record has not
been satisfactory. Some of the actions were taken at the last moment before
going to the Paris meeting of the FATF. For instance Pakistan promulgated an
ordinance aimed at reigning in the LeT, Al-Qaeda and Taliban, etc. which have
been banned by the UN Security Council.
This
ordinance, which was passed when the FATF axe was about to fall amended a
section of the Anti-Terrorism Act (ATA), enabling the authorities to take
action against the UNSC-proscribed individuals and terror outfits, like sealing
their offices and freezing their bank accounts. The UN head proscribed
Lashkar-e-Taiba (Let) / Jamaat-ud-Dawa much earlier but as these non state
actors are darlings of our establishment the action was taken belatedly when
threatened by the FATF whip.
It
is only a matter of time that we may also be put to take similar action against
the India specific terrorist groups such as Jaish Mohammad and Hizbul
Mujahideen. Apparently the move of the Pakistan establishment to get a fatwa
passed by over 1800 ulema of various sects indicates that these non-state jihadi groups
are in the process of being curbed or at least this is what we want to tell the
world that Pakistan would not be supporting private jihads of terrorist groups
in Afghanistan and India.
It
is because of such policies of using non-state actors as an instrument of our
national security and foreign policy that Pakistan was left to fend for itself
in the Paris meeting. When the Nawaz Sharif government had raised this issue of
not supporting non-state jihad actors with the establishment
and leaked the news to Dawn, all hell broke loose. Instead of addressing this
issue the establishment started intriguing against the Nawaz Sharif government.
Coming
back, the probable implications of being put on the grey list are that the FATF
regional group is expected to visit Pakistan very soon to see the level of
compliance of their guidelines. Senior central bank officials say that the
government has formed a committee now to plug the holes in the compliance
guidelines.
The cost of being isolated internationally
cannot be wished away by claiming that we have China’s support. Pakistan has
been put on the grey list when it is in dire need to raise funds from abroad in
view of the unprecedented current account deficit
Senior
bankers who have experience of compliance are of the view that costs of
transferring foreign currencies to and from Pakistan are likely to increase as
the international banks will have to scrutinise the movement of money closely.
As Pakistan’s foreign trade and remittances are dollar denominated they have to
pass through the New York based clearance houses. Since the action against
Pakistan has been taken on the behest of the US and other western countries the
banks have already started showing cautiousness in clearing and moving money to
and from Pakistan. This would slow down the movement of legitimate
transactions. The foreign banks operating outside Pakistan have not only
stopped opening the accounts of Pakistanis but are also shunning their business
away.
Pakistan
has had quite a liberal foreign exchange policy. The first hole in the very
strict foreign exchange manual was punched by the late Dr Mahbubul Haq in the
80s by introducing Foreign Exchange Bearer Certificates (FEBC). In the 90s
Nawaz Sharif government allowed Pakistan citizens to open the foreign currency
account with the facility that no questions will be asked about the source of
remittance. And also if this money is converted to Pak Rupee through the
banking channels it would be considered ‘white money’. Even today one third of
the foreign exchange reserves are basically these foreign currency deposits
with the banks.
The
Pakistani banks have become more cautious in opening the foreign currency
accounts of the local citizens. And it seems that to meet the FATF guidelines
the government will also have to take away the ‘no questions asked’ facility
about the source of remittance.
The
cost of being isolated internationally cannot be wished away by claiming that
we have China’s support. Pakistan has been put on the grey list when it is in
dire need to raise funds from abroad in view of the unprecedented current
account deficit. The costs of this borrowing internationally, Pakistani bankers
believe,may also rise due to the Paris set back.
The
writer can be reached at ayazbabar@gmail.com. He is the author of Whats wrong
with Pakistan
Published
in Daily Times, March 10th 2018.
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