RSTV: THE BIG PICTURE- TACKLING TERROR FINANCE
Introduction:
In the wake of the dastradly terror attack in Pulwama carried out by Pakistan based terror outfit Jaish-e-Mohammad , India had upped the ante against Pakistan on the issue of terror funding by pushing to blacklist the neighbouring country at the plenary meeting of the anti terror finance watchdog Financial Action Task Force , FATF being held in Paris.
Pakistan was placed on the FATF grey list in June , 2018 and put on notice to be blacklisted by October this year if it did not curb money laundering and terror financing . Pakistan was then given a 27 point action plan that was to be implemented by September this year and the same is being monitored by FATF Asia Pacific sub group.
Terror Financing
- The financing of terrorism involves providing finance or financial support to individual terrorists or non-state actors.
- Some countries maintain a list of terrorist organizations and have money laundering laws, which are also used to combat providing finance for those organizations.
The importance of combating terrorist financing:
- Terrorists need money and other assets, for weapons but also training, travel and accommodation to plan and execute their attacks and develop as an organisation.
- Disrupting and preventing these terrorism-related financial flows and transactions is one of the most effective ways to fight terrorism.
- Not only can it prevent future attacks by disrupting their material support, the footprints of their purchases, withdrawals and other financial transactions can provide valuable information for ongoing investigations.
- Countering terrorism financing is therefore an essential part of the global fight against terror threat.
- As terrorists and terrorist groups continue to raise money with use of various means, countries must make it a priority to understand the risks they face from terrorist financing and develop policy responses to all aspects of it
FATF:
What is it?
The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 on the initiative of the G7. It is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas. The FATF Secretariat is housed at the OECD headquarters in Paris.
Objectives: 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.
Functions: The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures and promotes the adoption and implementation of appropriate measures globally. In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.
Pakistan was placed on the grey list by the FATF in June 2018 for failing to curb anti-terror financing. It has been scrambling in recent months to avoid being added to a list of countries deemed non-compliant with anti-money laundering and terrorist financing regulations by the Paris-based FATF, a measure that officials here fear could further hurt its economy.
What is blacklist and grey list?
FATF maintains two different lists of countries: those that have deficiencies in their AML/CTF regimes, but they commit to an action plan to address these loopholes, and those that do not end up doing enough. The former is commonly known as grey list and latter as blacklist.
Once a country is blacklisted, FATF calls on other countries to apply enhanced due diligence and counter measures, increasing the cost of doing business with the country and in some cases severing it altogether. As of now there are only two countries in the blacklist — Iran and North Korea — and seven on the grey list, including Pakistan, Sri Lanka, Syria and Yemen.
Why did FATF decide to place Pakistan on its watch list?
- Pakistan had been on the same list from 2012 to 2015.
- The decision is overdue, given Pakistan’s blatant violation of its obligations to crack down on groups banned by the Security Council 1267 sanctions committee that monitors groups affiliated to the Taliban such as the Lashkar-e-Taiba, Jaish-e-Mohammed and the Haqqani network.
- Their leaders like Hafiz Saeed and Masood Azhar continue to hold public rallies and freely garner support and donations.
- Both the LeT and JeM, continue to praise and claim credit for terror attacks in India. They have grown their bases in Pakistan, with fortress-like headquarters in Muridke and Bahawalpur that the authorities turn a blind eye to.
- By doing this, successive Pakistani governments shown disregard for the outcry against terrorism worldwide.
- One violation was a Pakistani court’s bail to Zaki-ur-Rehman Lakhvi, LeT operational commander and a key planner of the November 2008 Mumbai terror attacks.
- Under the 1267 sanctions ruling, banned entities can get no funds, yet Lakhvi received the bail amount, and the authorities have since lost track of him.
What is UNSC resolution 1267?
- UNSC resolution 1267 was adopted in 1999.
- Under this, the UNSC designated Osama bin Laden and associates as terrorists. It also established a sanctions regime to cover individuals and entities associated with Al-Qaida, Osama bin Laden and Taliban wherever located.
- Since US invasion of Afghanistan in 2001, the sanctions have been applied to individuals and organizations in all parts of the world.
What are the implications for Pakistan now?
- Once placed in the “grey list”, countries face risk of downgrade by multilateral lenders like IMF, World Bank, ADB etc. And further reduction in their risk-rating by agencies.
- It may impede Pakistan’s access to global markets to attract foreign investments at a time when its foreign reserves are dwindling and external deficits are widening.
- Some kind of pressure is increased up with financial censures on its banks and businesses and targeted sanctions imposed against specific law enforcement and intelligence officials.
- If Islamabad will not comply with the obligations then the country runs the risk of being included on to the blacklist of the FATF that currently features Iran and North Korea.
- As a reaction to this move, authorities in Pakistan recently confiscated all properties of the Jamaat-ud-Dawa (JuD) and its charity arm, the Falah-e-Insaniat Foundation (FIF).
Pakistan and state-sponsored terrorism
- Pakistan has been accused by neighbouring countries India, Afghanistan and Iran and other nations, such as the United States the United Kingdom, and France of involvement in terrorist activities in the region and beyond.
- Money is transferred to terror organization via Pakistan army.
- Pakistan’s tribal region along its border with Afghanistan has been described as a safe haven for terrorists by western media and the United States Defense Secretary. According to an analysis published, Pakistan was, “with the possible exception of Iran, perhaps the world’s most active sponsor of terrorist groups… aiding these groups that pose a direct threat to the United States.
- Pakistan’s active participation has caused thousands of deaths in the region; all these years Pakistan has been supportive to several terrorist groups despite several stern warnings from the international community
- The government of Pakistan has been accused of aiding terrorist organisations operating on their soil who have attacked neighbouring India.
- Pakistan denies all allegations, stating that these acts are committed by non-state actors
- Former Pakistan President Pervez Musharraf has admitted that Pakistan supported and trained terrorist groups like Lashkar-e-Taiba (LeT) in 1990s to carry out militancy in Kashmir From 1979 Pakistan was in favour of religious militancy
- Many organizations change names and set up other organization to frame that Pakistan is looking into it.
How it helps India to deal with cross border terrorism:
- Recent proposal that Pakistan will put back in the list could affect Pakistan’s credit rating. This will adversely impact its ability to raise loans from major international financial institutions to service existing debt. This will become even more difficult as compared with the previous listing, given the adversarial relationship with the US and the latter’s influence in major financial institutions. So Pakistan will not have adequate resources to fund terrorism
- The decisions of the United Nations Financial Action Task Force (FATF)are about using the threat of economic punishment to move Pakistan away from funding terrorists operating against Afghanistan and India
- Being on the grey list would mean that Pakistan’s transactions are closely monitored. This would further cripple the country’s economy as companies across the world would hesitate from doing business with Pakistan. The International Monetary Fund and the World Bank too would avoid giving loans to Pakistan.
- India can now work with multilateral funder institutions to work outvhow Pakistan is channeling money to terrorism.
Update: Financial Action Task Force affiliate Asia Pacific Group (APG) places Pakistan on Blacklist for failing to combat terrorism, money laundering and meeting the required global standards. Pakistan was non-compliant in 32 of the 40 Compliance Parameters on Money Laundering & Terror Financing and Pakistan was low in 10 of the 11 Effectiveness Parameters.
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