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Two years on, Pakistan seems to be coming out of a quagmire. It was in February 2018 that the country had started attracting heightened global scrutiny over how it used to handle anti-money laundering and terrorism financing (TF) issues. After making progress over two years, it seems that Pakistan has FATF nodding in approval, albeit more needs to be done to secure another extension in a few months’ time.

Seasoned observers had modest expectations from the latest FATF moot. There was never a question for Pakistan to be put on the so-called blacklist while it was still making amends, just as there was little likelihood of getting off the so-called grey list as compliance hadn’t reached the difficult panacea. But it helps Pakistan that the language coming out of Paris is less ominous than it was in October 2019.

Naturally, folks are still queasy about hazards to Pakistan’s financial system down the road. After all, the country has breached the FATF deadlines thus far, with just over half of the items on the 27-point ICRG action-plan addressed as per FATF satisfaction. Now Pakistan is being asked to address the remaining deficiencies, most important being TF-linked legal proceedings and sanctions, by June 2020.

The sword is still hanging, as FATF could advise its members to require their financial institutions to be careful in dealings with Pakistan’s financial and trading system. However, for now, it seems that Pakistan is delicately placed on the favorable side of the very geopolitics that had ensnared the country as a high-risk jurisdiction and a tough compliance framework back in 2018.

It helps that despite the US-China squabbles on multiple levels, Pakistan’s FATF fate hasn’t become a point of contention between the two powers. China has been especially vocal about recognizing the progress that Pakistan has made despite the difficulties and in a relatively short amount of time. While the Gulf powers have been vacillating on this issue, Pakistan has Turkey and Malaysia in its corner.

Meanwhile, the deft handling of the Afghan end-game seems to have helped Pakistan score points with the US in a quid pro quo. US officials have been clear in the past that the road to rehabilitating US-Pak ties runs through Kabul. This transactional diplomacy has its limits, of course, but 2020 likely won’t be the year that turns things sour again. Therefore, it increasingly looks like grey-list is the new normal until next year. It is better, then, to keep addressing FATF concerns as doing so benefits Pakistan the most.