No matter which way one looks at it, the clock is ticking for Pakistan. Three years after coming clean, the country is now back into the ‘grey list’, after the latest plenary of the Financial Action Task Force (FATF) held in Paris last weekend. Still, the caretakers, who were dealt a bad hand, didn’t let things slide further. But now starts the real test. And it concerns the future stability of the country’s financial system.

In the coming months (reportedly until September 2019), Pakistan is required to undergo a massive overhaul of its institutional frameworks to counter terrorism-financing and money-laundering activities. That process has to be in line with an action plan, some ten points of which the FATF published on its website last Friday. The list is long, ranging from monitoring of terrorism-financing activities, individuals and entities to prosecuting and penalizing violations.

Given that the said action plan has been endorsed at the highest level of Pakistani state, it is futile to question the willingness going forward. Now it has come down, mostly, to the issues of capacity and coordination to implement the checklist across the country’s financial, legal and administrative systems.
Though making substantial progress won’t be easy, the alternative should be more unpalatable and spring all concerned into action. Stakes have become bigger now. If Pakistan is perceived to be slow-walking FATF on its action plan, it might trigger a response next year that eventually places Pakistan in the company of ‘high risk’ and heavily-sanctioned jurisdictions of Iran and North Korea.

Diplomatically, Pakistan should expect little respite. There has been relentless pressure from the United States, which is frustrated over the quagmire in Afghanistan. It remains to be seen whether recent attempts at bilateral rapprochement bear any fruit. As terror-financing is deemed a sensitive issue globally, China has been careful, going only as far as offering moral support to Pakistan.

It will help having a new political government in-charge from August. As the situation is grave, the new administration should spend some of its political capital in taking difficult decisions to follow through on the FATF commitments in a timely manner. If the next administration means business, any requests for waivers and deferrals may meet better reception the next time the global body reviews Pakistan’s case.
The only positive coming out of the FATF Paris moot is that, for now, a bad situation hasn’t been made worse. Pakistan has secured some breathing room, to work on something that is in its own interest. The grey-list relapse isn’t the end of the world, though it’s a bad diplomatic omen and will make it costlier to conduct correspondent banking and international trade.

But there is considerable homework to do now.