In June 2019, the Financial Action Task Force, or FATF, chose to keep Pakistan on its gray list rather than slapping it with a formal black list designation. At the time, the logic of the international watchdog charged with combating money laundering and terror financing was to give Islamabad more time and encourage it to pass legislation to tackle the problem.
While the FATF has, in recent days, signaled that it is inclined to keep Pakistan on the gray list, this would be a mistake both for FATF credibility and for regional stability.
Consider this: Just days prior to its full review, the FATF’s Asia-Pacific Group kept Pakistan on its “enhanced follow-up” list, and the FATF has chastised Pakistan for “meager progress” as it complied with only two of 40 recommendations. Even these two reforms need a caveat: While the Pakistani Senate passed two reforms that theoretically address some of the FATF concerns, many in government openly opposed the measure.
“Are we enemies of the nation?” Maulana Atta Ur Rehman, a senator, former tourism minister, and vice chairman of the Jamiat Ulema-e-Islam party, remarked during the debate while condemning the move. Nor is it clear that Pakistan’s Inter-Services Intelligence — the powerful intelligence agency which has sponsored terrorist groups targeting Afghanistan, India, and the United States — has even adhered to the Senate’s actions.
Likewise, Pakistani diplomats and registered lobbyists for Pakistan in the U.S. reportedly say that Pakistan is acting in good faith because Pakistani courts have convicted four designated persons and that it has lodged terror finance cases against 11 designated persons and eight other leaders.
Still, the 2019 FATF mutual evaluation report identified 66 organizations and approximately 7,600 individuals proscribed under U.N. Security Council Resolution 1373, which was passed to suppress terror financing in the wake of the Sept. 11 terror attacks. In effect, Islamabad wants credit for taking action on less than 0.2% of the cases FATF requires.
While the Pakistani newspaper Dawn reported last month that the FATF Asia-Pacific Group had made some improvements in efforts to create a system intolerant of money laundering and terror finance, this is akin to suggesting a woman is only a bit pregnant but not fully so.
The reality of both great power competition and China’s efforts to undermine and replace the post-World War II liberal order is that they occur on a number of fronts. Increasingly, it appears the FATF is one of them. Rather than make substantial reforms, Pakistani officials appear to be counting on the fact that China will go to bat for them diplomatically and shield Pakistan from accountability. Here, Beijing appears less committed to counterterrorism and more to a desire to use Pakistani terrorism as a tool to harass India with whom it is locked in a border clash in Ladakh.
When Chinese Ambassador Yao Jing met last month with Abdul Hafeez Sheikh, Pakistan’s special adviser for finance and revenue, they reportedly talked far less about FATF commitments and more about the $60 billion China Pakistan Economic Corridor, whose success depends on Pakistan’s economic solvency and its escape from accountability to the FATF.
Hence, China’s action and the Friday vote on the question of Pakistan’s FATF status will be as much about countering terror finance as they are about whether China will use its membership in yet another international body to corrupt it beyond recognition, the goal being to subordinate the liberal order to Beijing’s narrow interests.