As numbers go, Pakistan appears to have done well in this last plenary meeting of the Financial Action Task Force (FATF) held in Paris this week. As facts go, not quite.
This time Pakistan has progressed to ticking 24 boxes out of 27 for the right thing done by FATF reckoning. That makes it three short, down from six at the last plenary meeting last year. But it failed to get off the grey list, that it lobbied very hard to do.
For that to happen by the next plenary in June, Pakistan will have to score 27 out of 27. As it happens, the last three may be the most difficult to crack. If Pakistan does get to tick those boxes as well—and if the FATF is not letting lapses slip under its watch—Pakistan would then appear a very different country to what India now encounters of it.
By way of noting the positive stuff from Pakistan, the FATF says that its law enforcement agencies are now “identifying and investigating violations”, and “demonstrating enforcement”. They are also “working to prevent raising and moving of funds by designated persons.” Some movement forward is acknowledged here. But the language stops short of blanket acceptance of claims even of some achievements among the 24 said to have been made. The FATF still speaks of claims over what’s said to have been done.
The three remaining recommendations are telling:
Pakistan must demonstrate targeted financial sanctions against all designated persons and groups.
Pakistan must show now that investigations and prosecutions then target those acting on behalf of designated persons.
And it must show that its actions result in effective and dissuasive sanctions.
These recommendations arise inevitably from FATF findings that Pakistan is taking only selective action against designated persons and groups; that some at least among these are diverting their activities to others acting on their behalf, and that effective results are not visible.
FATF President Marcus Pleyer told media representatives Thursday following the plenary that when it is showing progress is “not a time to put it on the blacklist.” But the all-clear for Pakistan won’t come easy. Once Pakistan completes full implementation of the action plan, the FATF will then “verify the implementation and test the sustainability.” The next steps will be decided in the June plenary, he said.
In a diplomatically worded suggestion, Pleyer said “I strongly urge the completion of the action plan.”
Political
On the face of it, the status quo has continued. Pakistan was on the grey list earlier and remains there now. But this lack of movement was itself fiercely contested. For Pakistan, and for Prime Minister Imran Khan particularly, the failure to shake the country out of the grey listing will be a setback.
In that, the US has inevitably been a critical player. A significantly large number of 39-member countries within the FATF take their cue from the US. Thirteen would need to vote to get Pakistan off the grey list altogether. Without a green light from the US that could be a tough target to reach.
In spotting the failures and holding Pakistan to account over them the FATF has undoubtedly demonstrated a sharp eye that is looking behind fronts and disguises. And the FATF is preparing itself for more such vision.
The FATF is implementing a new risk-based rather than rule-based investigating system this year. And it has prepared a confidential new way of checking compliance. That will still need someone to do the checking. In Pakistan that is an eternally difficult problem.
—London Eye is a weekly column by CNBC-TV18’s Sanjay Suri, which gives a peek at business-as-unusual from London and around.
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