The Financial Action Task Force (FATF) inclusion of Turkey in the list of “grey” countries and keeping Pakistan on it for another about six months has once again raised eyebrows over the watchdog’s conduct.

The FATF on Thursday unanimously decided to keep Pakistan on its grey list, but ruled out the possibility of blacklisting the country as it had implemented the majority of the conditions.

The same day, the FATF decision to downgrade Turkey to a list of countries required to undertake sweeping measures to curb terror financing has once again raised a red flag about the impartiality of the Paris-based organisation. 

FATF President Marcus Pleyer announced the decisions at the conclusion of the watchdog’s three-day plenary meeting.

“Pakistan had to complete two concurrent action plans with a total of 34 items and it has now addressed or largely addressed 30 of the items,” said Pleyer.

He said that of the 27 action points agreed under the June 2018 plan, 26 had been implemented – a position that remained unchanged since then.

Overall, Pakistan is making “good progress” on the June 2021 new action plan.

“Four out of the seven action plan items are now addressed or largely addressed.”

However, the remaining condition of the June 2018 plan is the most crucial one, which Pakistani sources said was also the reason to keep country on the FATF watch list.

TURKEY: The FATF announcement on Turkey can scare off foreign investors, says TRT World

Analysts say that the global financial watchdog has become selective in targeting countries where banks have weak compliance or controls to stop the illicit flow of funds.

“If they were fair in their treatment of all the countries, they would have put the UK in the FATF grey list,” said Hassan Aslam Shad, a Middle East-based lawyer who has studied the watchdog for years. 

“But they will not do it. They have made up their mind and preconceived notions drive their decisions,” he told TRT World

The recently leaked Pandora Papers, a trove of documents from offshore companies, showed that two-thirds of the firms that corrupt politicians and bureaucrats use to hide their wealth are registered in the British Virgin Islands. 

In its decision, the FATF said Turkey needs to enhance the oversight of its anti-money laundering laws and prosecute UN-designated terror groups. 

Ankara said its inclusion in the grey list was “unfair” but insisted that it will work closely with the organisation to address its concerns in a bid to come out of  the “unwarranted list within the shortest time.”

FATF’s decision matters as it increases the risk profile of a country under monitoring, making it costly for the government and private sector to raise funds from international capital markets.

Being on the grey list also means that domestic and multinational banks have to spend more resources on compliance and money laundering staff, who have to be extra vigilant in detecting fraud and terror financing transactions. 

GEOPOLITICS: In 2018, when cash-strapped Pakistan was struggling to avoid being included in the grey list, Turkey was the only country that supported it. 

Turkey’s ties with its traditional western allies, including the US, have strained in recent years. Washington barred the sale of F-35 jets to Turkey after Ankara decided to install the Russian surface-to-air S-400 missile system.

Turkey’s efforts to enforce its maritime rights in the Mediterranean Sea has angered Greece, an EU member state. 

Turkey is also on the opposite side of some of its western allies in Syria and Libya. Despite spending billions of dollars on its own to host around 4 million Syrian refugees, Turkey is regularly targeted by European leaders for not doing enough to protect human rights. 

The EU’s interference in Turkey’s internal affairs is nothing unusual. Earlier this week, ambassadors of ten countries, including the US and Germany, issued a joint statement, calling for the release of Osman Kavala, a Turkish businessman facing terrorism charges.

“Looking at the way the geopolitical system is working these days, I wouldn’t be surprised if Turkey continues to remain on the grey list for quite a period of time,” said Shad. 

FATF’s decision on Pakistan has highlighted how powerful countries are influencing the global money-laundering monitor. 

“I was an ardent believer in global institutions. I was the biggest critic of Pakistan, saying how the country was late in addressing deficiencies in its system,” said Shad. 

“But over the years I realised every time Pakistan was close to meeting the requirements to get out of the FATF list, they would add another condition.” 

In June, FATF said it will keep Pakistan on the grey list even though Islamabad had complied with 26 of the 27 demands that were set out in an action plan such as making it harder for criminals to move illicit funds. 

A few weeks later, India’s foreign minister S Jaishankar publicly acknowledged that New Delhi used its influence at FATF to keep Pakistan in the grey list. 

“FATF has become deeply politicised,” said Shad. 

PAKISTAN: The FATF announcement on Pakistan read: “Pakistan should continue to work to address its other strategically important AML/CFT [anti-money laundering and terrorist financing] deficiencies, namely by providing evidence that it actively seeks to enhance the impact of sanctions beyond its jurisdiction by nominating additional individuals and entities for designation at the UN.”

It added: “Islamabad should demonstrate an increase in money laundering investigations and prosecutions and that proceeds of crime continue to be restrained and confiscated in line with the country’s risk profile, including working with foreign counterparts to trace, freeze, and confiscate assets.”

Western nations and India have long been pressuring Pakistan through the FATF forum to target eight groups – the Afghan Taliban, Jamaat-ud-Dawa (JuD), Haqqani Network, Jaish-e-Mohammed (JeM), Lashkar-e-Taiba (LeT), Falah-e-Insaniyat Foundation, al-Qaeda and Islamic State.

Interestingly, some of these entities and their leaders are now part of the interim government in Afghanistan. That makes it impossible for Pakistan to move against them.

Pakistan was placed on the grey list in June 2018 and was asked to implement a 27-point action plan to exit it.

To a question about an Indian minister’s claim that the Prime Minister Narendra Modi-government had ensured that Pakistan remained on the grey list, Pleyer said the FATF was a technical body and it made decisions by consensus.

“The decision to retain Pakistan under increased monitoring is also taken with consensus.”

To another question by an Indian journalist, Pleyer said there was no discussion to blacklist Pakistan, as the government was cooperating with the FATF and had already completed 30 of the 34 action points.

The FATF stated that since June 2018 when Pakistan made a political commitment to work with the global body and the APG [Asia/Pacific Group] to strengthen its AML/CFT regime and to address its strategic counter-terrorist financing-related deficiencies, the country had made “significant progress” across a comprehensive action plan.

“While Pakistan has reported some steps, the FATF encourages [it] to continue to make progress to address as soon as possible the one remaining CFT-related item by continuing to demonstrate that TF [terror financing] investigations and prosecutions target senior leaders and commanders of UN designated terrorist groups.”

In response to additional deficiencies later identified in Pakistan’s 2019 APG Mutual Evaluation Report (MER), in June 2021, Pakistan provided further high-level commitment to address these strategic deficiencies pursuant to a new action plan that primarily focuses on combating money laundering, it added.

The global watchdog said since June 2021, Pakistan had taken swift steps towards improving its AML/CFT regime, including by enacting legislative amendments to enhance its international cooperation framework; demonstrating DNFBP [designated non-financial businesses and professions] monitoring for PF-TFS [terrorist financing and financing of proliferation] and supervision commensurate with the risks; and applying sanctions for noncompliance with beneficial ownership requirements.

The story was filed by the News Desk.
The Desk can be reached at info@thecorrespondent.com.pk.

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