The multilateral squeeze is on. Earlier in February, the FATF (Financial Action Task Force) had asked Pakistan to prepare a comprehensive action plan to beef up its legal and institutional capacity concerning anti-money laundering (AML) and combating financing of terrorism (CFT) by June, or risk being placed on a black-list.
An action plan was submitted recently to the Asia-Pacific Group (APG), the FATF’s regional arm; it was reportedly found lacking and now Pakistan needs to submit a new plan next month.
Pakistan has taken some steps in recent months to crack down on organisations proscribed by the UN. It seems, however, that the FATF is demanding more than seizure of movable & immovable properties and ban on activities of those outfits; it wants effective enforcement through prosecution. That’s probably too much for Pakistan at this stage. Come June, Pakistan may find itself in a tough spot, for a number of reasons.
One, soon it will be election season and there will be a caretaker government in charge. It will be naïve to expect an interim government, which is without a mandate to make sweeping legal and institutional changes, to foot the bill for prior procrastination.
The outgoing government, however weak it’s been, had three good months to come up with an agreeable action plan. Au contraire, the Abbasi-Miftah duo seemed more interested in rushing an amnesty scheme, which, by the way, APG took an exception with.
Two, Pakistan’s diplomatic difficulties may fail any hopes of skirting the ignominious watch-list. The February FATF meeting in Paris didn’t seem like a neutral playground.
This time, too, there is fear that continued Western pressure, especially from the US, will lead to another political outcome no matter what action plan Pakistan comes up with. Not much can be expected from close allies, who have discovered the limits of their unqualified support when it comes to sensitive global issues like AML and CFT.
And three, any adverse outcome at the Paris FATF plenary late next month is only going to exacerbate continuing macroeconomic troubles for Pakistan. Already, dollars from D.C. have almost run dry, bulk of external deficit financing is being fed through commercial loans, and Chinese content in those loans is growing.
The longtime friend may keep it coming; but it is in China’s interest that global financial system remains accessible to Pakistan. But post elections, it will likely be a difficult recourse to the IMF.
Given the political situation and financial stakes involved, the Western community – which really needs to think about standing up to US bullying in multilateral affairs – should allow Pakistan some wiggle room. If the collective objective is indeed to force Pakistan to improve its AML/CFT regime, there are better chances of success in a few months’ time when a new government brings a fresh dose of political capital to Islamabad.
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