FATF setback could curb Pak ambitions to spur trouble in Afghanistan

Despite the efforts it appears to have made, Pakistan was found deficient and the UN’s Financial Action Task Force (FATF) stated on June 25 that Pakistan would continue to remain on the ‘grey list’ of countries, which require increased monitoring for terrorist financing activities. While Islamabad is fuming at this decision, it could prove beneficial for Afghanistan, and even India, as it would serve to curb Pakistani ambitions to stir up more trouble in war-ravaged Afghanistan as the US and NATO troops depart.

Getting off the FATF’s ‘grey list’ has been a top priority for the Pakistan government, making Islamabad’s frustration more acute. Continuation on the ‘grey list’ has not only made it very difficult to access much-needed financial aid from the IMF, World Bank, Asian Development Bank and other multilateral institutions, it has also made its strategic ambitions in the region more difficult to attain.

By using its considerable influence with the Taliban, Pakistan has consistently aimed to keep India at bay while it plays a key role to shape the nature of the polity and the security apparatus that will emerge from the intra-Afghan dialogue once the US and NATO troops withdraw from Afghanistan. In many ways, primarily given its geographic position and strategic inclination, Islamabad has succeeded in keeping New Delhi distanced from the decision-making in Kabul and for Afghanistan as a whole.

But given the Taliban resurgence on the ground and the real possibility of a violent takeover by them of Kabul, there is no certainty that any such substantive intra-Afghan dialogue will take place. For Islamabad, which has not only provided sanctuary to the Taliban’s top leadership and treated their wounded forces in its hospitals, but has also provided them substantial financial assistance, this continued stay on the FATF grey list could become a huge problem. Its efforts at this crucial juncture to shape the external and internal environment in Afghanistan may backfire if it is unable to provide continued funding to the Taliban, which continues to be on the UN’s proscribed list of terrorist organizations. Without this funding, it is entirely possible that parts of the Taliban could go out of its control.

The FATF, which monitors global terror financing, places countries which it views as having deficiencies in their internal systems, which enable money laundering, terror financing and weapons proliferation, on their grey list. These countries face heightened difficulties in international financial dealings, like seeking loans and credit, leading to economic problems and losses. Pakistan claims to have lost out on $10 billion annually since 2018, when it was first put on the list.

The reason the FATF has retained Pakistan on its grey list is for not cracking down hard enough against UN-designated terrorists on its territory. These include leaders of the Taliban, the Haqqani Network, Lashkar-e-Tayyaba (LeT), Jaish-e-Mohammed (JeM), Jamaat-ud-Dawah (JuD), al-Qaeda and Islamic State.

India, which chairs some key UN counter-terrorism committees, has kept up the pressure on FATF members to ensure that Pakistan fulfils all its commitments. Hence Islamabad, after being retained on the grey list, accused New Delhi of ‘politicizing’ the FATF and working against it, despite fulfilling 26 out of the stipulated 27 conditions imposed on it.

The LeT, JuD and the JeM are of particular interest to India, since LeT founder and JuD chief Hafiz Saeed master-minded the November 2008 Mumbai terror attack and JeM chief Masood Azhar, who was released from India in the IC-814 hijack incident, has specifically chosen to target India, even the Indian Parliament. While Pakistan has arrested Saeed, Azhar remains elusive.

Pakistan risked demotion earlier to the FATF ‘blacklist,’ which would have meant it being declared a state sponsor of terrorism and boycotted, but was saved by China, then FATF chair, when it acted to arrest and jail Saeed and others like Zaki-ur-Rehman Lakhvi, who allegedly planned the Mumbai 26/11 attack.

Pakistan has managed to act politically on most issues highlighted by the FATF by putting in place proper legal frameworks on money laundering and terror financing. It has taken action to identify and sanction illegal Money or Value Transfer Services, implemented cross-border currency and bearer negotiable instruments controls, improved international cooperation in terrorist financing cases and passed amendments to make its Anti-Terrorism Act more stringent.

However, the remaining issue, of acting against UN-designated terrorists, including the Taliban, on its territory, will be a major problem for the Pakistani state, which is deeply embedded at various levels with different groups. Cutting these ties could trigger a serious backlash against the Pakistan establishment, both military and civilian. And severely hinder its efforts to gain strategic depth in Afghanistan. The coming weeks will be crucial for both.