Nawaz’s remarks and FATF Terror Watch List
Former PM Nawaz Sharif’s controversial remarks about Mumbai attacks might be viewed as a desparate and messy attempt to score political points but Pakistan may face damaging consequences internationally due to his remarks.
Earlier this year, United States and United Kingdom jointly moved a motion to place Pakistan on a global terrorist-financing watch-list by the Financial Action Task Force (FATF).
FATF is an inter-governmental body comprising 37-member states/observers including India and Israel.
FATF objectives include setting standards to combat money laundering, the financing of terrorism and the financing of proliferation of weapons of mass destruction and supporting the implementation of these standards.
The US-UK motion was joined by France and Germany.
The indictment against Pakistan was that it had not acted on some of the non-state actors and persons designated as terrorists by the UN Security Council Resolution 1267.
More specifically the concern was about Jamaat-ul-Dawa and Falah-i-Insaniyat Foundation being allowed to operate in the country, and Hafiz Saeed being free to organise rallies and raise funds.
United States strongly lobbied with FATF member states to place Pakistan on the list.
However, at the February 2018 meeting of the FATF; Pakistan had a very narrow escape of not being designated on list as the member states failed to reach consensus on placing Pakistan on the global list of countries that finance terrorism.
Pakistan is scheduled to be reviewed at the next meeting of the FATF in June 2018.
The member states which are strongly lobbying against Pakistan to be on FATF terror list may use Nawaz Sharif remarks as Pakistan’s admission to support militant groups.
Placing Pakistan on ‘grey list’ will mean that Pakistan’s financial system poses a risk to the international financial system because of “strategic deficiencies” in its ability to prevent terror financing and money laundering. Current grey list comprises of Ethiopia, Yemen, Iraq, Syria, Serbia, Trinidad, Tabago, Vanuatu and Tunisia.
If Pakistan fails to build consensus on the FATF proposed action plan then it can be black listed by FATF like Iran and North Korea.
If Pakistan is placed on either of the terror watch list then it will face financial sanctions, and her ratings will be downgraded by international banking and financial institutions.
Pakistan’s financial stress will be multiplied. Not only the cost of doing business and cost of living will increase, but the foreign investment will also dry up. This will deteriorate the country’s macroeconomic situation further which is already under compression due to a flared trade deficit and falling foreign exchange reserves.