The Pulse

Why Has Pakistan Set Up an FATF Cell at the Federal Bureau of Revenue?

Recent Features

The Pulse

Why Has Pakistan Set Up an FATF Cell at the Federal Bureau of Revenue?

Pakistan immediately needs to put in place a major reform package to address the forum’s concerns.

Why Has Pakistan Set Up an FATF Cell at the Federal Bureau of Revenue?
Credit: CC0 image via Pixabay

Pakistan has set up an independent Financial Action Task Force (FATF) unit at the Federal Bureau of Revenue (FBR) to monitor the ongoing implementation of reforms to curb terror financing and corruption. Reportedly, the government in Pakistan is setting up several other such units in various departments to expedite the implementation process before the next FATF deadline approaches.

Will Pakistan be able to meet the FATF next deadline in terms of implementing the action plan that it committed to during the last hearing?

The existing urgency and action being taken in Pakistan suggest that the country is taking the issue very seriously. A few days ago, the government in a statement said that the “timely completion of the FATF action plan” is its utmost priority. The FATF is expected to commence the next review of Pakistan’s Progress in October 2019. For Pakistan, what should be worrying is that during the last hearing, FATF conveyed its concern that “Pakistan had failed to complete the action plan first by a January deadline and then again by a May deadline.”

What’s more concerning for Islamabad is that the next inquiry is going to be the last and Pakistan is not likely to receive any more concessions after November. At November’s meeting, if the FATF still considers that Pakistan’s progress remains insufficient, Islamabad can expect some serious penalties that are not going to be useful for the country’s economic growth.

It’s the prospect of severe economic consequences that is driving Pakistan to patch-up remaining loopholes highlighted by the forum. As of now, it’s unclear if Pakistan can successfully come up with a plan to plug all existing gaps. While some of the much-needed reforms have already been implemented, a lot more remains to happen before Pakistan gets off of the FATF’s grey-list or avoids being put on the blacklist.

In terms of diplomacy, while Pakistan has a credible support base at the forum in the form of China and other countries, Islamabad doesn’t want to make any mistakes to offer any other country a chance to undermine its case. For some time, New Delhi had tried to build pressure on Pakistan at the FATF and Washington had offered a helping hand in this regard for reasons related to the country’s troubling bilateral relationship with Islamabad. While Pakistan is going to be mindful of New Delhi’s motives, Washington may not be as forthcoming in terms of pushing ahead with its opposition to isolate Pakistan’s case.

A lot has changed during the last two weeks when it comes to Pakistan and the United States’ bilateral relationship. Pakistan’s top military and civilian leadership were not only able to fix Islamabad’s damaged relationship with Washington to some extent, but have reportedly also received assurances that the U.S. will not undermine Pakistan’s case at the FATF. Arguably, if materialized, the U.S. support or softening of its position at FATF concerning Pakistan’s case is one of the major wins for Islamabad.

However, it’s important to note that Islamabad is going to be expected to deliver something major on Afghanistan if the current narrative is to last a few months. The leadership in Islamabad is aware that while Pakistan may have gotten something from Washington, the endurance of Pakistan’s support for the U.S. is essential. It remains to be seen if the Afghan peace process makes any major headways in the coming weeks as the situation is going to have a direct impact on Pakistan’s position at the FATF.

The setting up of special units in various financial institutions are an indication that urgency in this regard has kicked in. Come November, Pakistan will need a lot more than just a sincere intent to implement the FATF’s guidelines. In this regard, a combination of policy wide-ranging actions and smart diplomacy can assist Pakistan’s case at the forum.

Islamabad will have to work hard over the next few weeks to not only makes sure that it makes sufficient progress domestically on the issue but also regionally in terms of gaining some major concessions from the Taliban.