FATF and global Politics

Rarely does China express its opinions on global politics vocally. But in the case of politicization of FATF, it has minced no words. It strongly expressed its indignation over the blatant display of politics in FATF and pointed towards the USA and India as the ones attempting to exert their influence on FATF proceedings.

"China does not want FATF to be politicised by any single country. There are some countries, which want to include Pakistan in the blacklist. We consider they have political designs. That is something China is against. China stands for justice," Deputy Director General for Policy Planning of Chinese Ministry of Foreign Affair Department of Asian Affair is quoted as saying.

He further stated:"China stood with Pakistan and blocked any attempt to include Pakistan in the blacklist. We made it clear to the United States and India that we cannot do it. It goes beyond the purpose of FATF."

He added that FATF was not meant to put any country in the blacklist, rather to support it to take action against terror financing.

"China will help [Pakistan] technically and politically to improve its system," he added.

Besides China, Turkey and Malaysia also supported the country in the FATF meeting held last October. According to the 36-member FATF's Charter, the support of at least three countries is required to keep any state from being blacklisted.

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. The FATF is therefore a "policy-making body".

But like the World Bank and IMF, FATF too has been politicised and often used as political leverage by World powers to seek compliance from weaker nations. The political objectives of India and the USA in the region are well known and Pakistan's firm stand on a number of issues is considered as an obstacle in their way.

The inclusion of FATF conditionality in IMF agreement with Pakistan and linking of the two is not without a mala fide purpose. Pakistan is now facing the pinch of it and has asked IMF to relax conditionalities under the $6 billion Extended Fund Facility (EFF) relating to the Financial Action Task Force (FATF) and issuance of sovereign guarantees to help raise over $4bn from domestic and international markets.

Pakistan has budgeted about $3bn bonds (about Rs 450 billion) - Islamic Sukuk and Eurobond - to be launched in the international capital markets during the current fiscal year to meet targets under the EFF for foreign inflows. Separately, the government has planned to raise about Rs200bn from domestic Islamic banks for the power sector to scale down circular debt.

Likewise, the government negotiated Islamic financing worth around Rs200bn for the power sector from domestic banks in recent months on top of another Rs200bn secured earlier this year.

But all these transactions are checkmated by the IMF conditionalities as part of the 39-month EFF. One of the structural benchmarks under the IMF programme is for Pakistan to "adopt measures to strengthen the effectiveness of AML/CFT (anti-money laundering/combating the financing of terrorism) framework to support the country's efforts to exit the FATF list of jurisdictions with serious deficiencies by the end of October 2019"

Pakistan missed this timeline as FATF again asked it to do more and gave it another three months to comply with what FATF expects it to do. This appears to be a sheer politicized move and China has well understood the motives behind it.

In today's world of politics, double standards are being blatantly displayed by global regulators - be it the United Nations, FATF and similar. These institutions no longer serve the purpose they were mandated to serve and have become meaningless.

While money laundering, terrorist financing and other related threats to the integrity of the international financial system could well be home-based but a great part of it is influenced by abettors and beneficiaries located in effluent countries.

Pakistan has long suffered on account of ethnic and religious proxy wars waged on its soil by countries promoting their conflicting doctrines. Also, the money laundering and terrorist groups conveniently find safe havens and facilitators in these effluent countries. The responsibility of these countries to combat terror financing and money laundering cannot be ignored or condoned.

Pakistan is being cornered by India in FATF, whereas its own role in money laundering and terrorism in Pakistan is ignored by FATF.

Several scholars and legal experts criticize FATF as a "tool that powerful countries use to force their preferences on others" and to "paint non-compliant states as rogue and unreliable". In this regard, Pakistan needs to be more proactive. It has enough substantiated evidence to present its case to FATF to censure India for its role in terror financing in Pakistan.

PM Imran Khan in his address at the United Nations well exposed these fault-lines of discrimination and double standards in the world order. This needs to be expanded sufficiently to give a chance to emerging nations to survive with dignity.

It is a good time to bring around a change and a beginning can be made by having these deficiencies recognised as unfair acts. Countries like Pakistan, Malaysia and Turkey in today's world have stood up well against the unfair world order and can lead the way.

(The writer is former President of Overseas Investor' Chamber of Commerce and Industry)