Pakistan on FATF watchlist and Business of Terrorism. Commentary by EFSAS


Terrorism is a syndicate-based activity; its business is to induce fear and, in order to generate that fear, terrorism, like any other business, requires money. Terrorists need financial support to carry out their operations - to acquire weapons, to fund travel, to run training camps, to recruit new terrorists, to bribe officials, to secure safe-havens, to obtain false documentation, to popularize their cause, etc. As long as money flows, terrorism will continue to sustain itself. Therefore, virtually by depriving terrorist outfits from having an access and exploiting the wider financial system, and being externally funded, terrorist attacks could be prevented.
As the former US Attorney General, John Ashcroft has summarised it: “The war against terrorism is a war of accountants and auditors, as well as a war of weaponry and solicitors”.
Money trails often provide invaluable information to law enforcement bodies about those potentially involved in terrorism, helping professionals to identify and apprehend terrorist outfits. The recent findings of the Financial Action Task Force (FATF) with regard to Pakistan’s propensity towards state-sponsored terrorism confirms that claim. The attitude of Pakistan's government towards terror groups has been described, at best, as dualistic. On the one hand, terrorists are criminalized by law and should be held liable; on the other hand, elements within the Pakistani establishment provide them with both logistical and financial support, turning Pakistan's State institutions, accomplices in a broad range of terror finance operations.
The FATF, an inter-governmental body that sets standards and promotes the effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and any related threats to the integrity of the international financial system, altogether with the United States and its European allies have tabled a motion, which intends to place Pakistan on a money-laundering and terror-financing ‘grey’ watch-list of countries considered non-compliant with global anti-terrorist financing regulations.
The FATF maintains grey and black lists for identifying countries with poor and corruptible measures against these issues. The agency does not have the powers to impose sanctions on a country that does not meet the required standards, yet its listing can affect its international transactions, which would then become subject to greater scrutiny. This increases the cost of doing cross-border transactions and ultimately higher cost of doing business locally. A decline in foreign transactions and a drop in foreign currency inflows could further widen Pakistan’s large current account deficit, the Achilles heel of its economy, and it would be more difficult and expensive for Pakistan to borrow money from international debt markets, which as a result would have serious negative consequences on its economy.
The last time Pakistan was on the watch-list was in 2012-2015 and FATF’s decision seems far from groundless; The country has experienced a whirlpool of various forms of terrorism and insurgent activities for several decades. Pakistan is internally crippled by terrorist activities within its borders, which despite the fact that impose a perilous danger on the entire stability of the country and destroy its socio-economic structures, continue to receive vast flows of funds from its governing bodies. Pakistan-based terrorist groups use a wide diapason of methods for raising finances, which include, the manipulation of the hawala system (an informal system of money transfer), misusing the charitable sector as a forefront, drugs-financing, abduction for ransoms, having undeclared assets abroad and many others.
State Department spokesperson Heather Nauert argued, “the U.S. has consistently expressed a long-standing concern about ongoing deficiencies in Pakistan’s implementation of its anti-money laundering/counterterrorism finance regime. In addition to broader systemic concerns, this also includes Pakistan’s non-compliance with its commitments under UN Security Council Resolution 1267”
This Resolution sanctions individuals and entities associated with terrorist groups wherever located, and freezes their assets. Therefore, one of the main focuses of the FATF motion is the targeting of Hafiz Saeed, the 2008 Mumbai attacks mastermind and founder of Lashkar-e-Taiba (LeT) and its charity branches Jamaat-ud-Dawa (JuD) and Falah-i-Insaniat Foundation (FIF), who has been designated a "Global Terrorist" by the United Nations and had a $10m bounty placed on him by the US in 2012. Saeed has repeatedly denied involvement in the Mumbai attacks and says the charitable organisations he founded and controls have no ties with militants, and in a recent statement deemed Pakistan’s crackdown on his seminaries ‘illegal’.
Yet, after years of denial and under pressure to act against banned groups, Pakistan announced that it had amended its anti-terrorism law to prohibit militant groups and organisations that are listed as “terrorists” by the United Nations, a move seemingly seen to be targeting charities run by Saeed.
However, the FATF motion, the US $2 billion suspension of military aid, and any other increased coercions on behalf of the international community, are unlikely to get Pakistan to fundamentally alter its behaviour. The threat of economic downfall does not seem to worry Pakistan too much. For example, U.S. military aid to Pakistan decreased by 60% between 2010 and August 2017, without a significant impact on Pakistan’s Army. Pakistan feels it can always seek economic assistance from China, its lasting ally. Although China does not want to see a further external leakage of terrorism and destabilization in South Asia, it has not been willing to take punitive action against Pakistan’s support for the Haqqani Network and the Afghan Taliban. Furthermore, Islamabad can attempt pursuing Saudi financial aid, which Saudi Arabia may grant, since it regards Pakistan, which shares a 909-kilometer border with Iran, as an important asset in restraining Iranian influence. Thus, Pakistan might believe that it can ride out tensions with the constraints currently imposed by the US and its European allies.
In addition to that, the current operation of cracking down the funding of terrorist groups risks backlashing against itself. The international community has many interests in Pakistan, beyond freezing the financial assets of extremist outfits: ensuring the political stability and socio-economic development of the country; encouraging its democratization, pluralization, and stronger civilian and technocratic governance; safeguarding the human rights of the population; getting Pakistan rid of the deployment of tactical nuclear weapons (which could fall into terrorists’ hands); dissuading Pakistan from resurrecting its past nuclear proliferation activities, and preventing a major Pakistan-India war, as well as Pakistan-sponsored terrorist attacks.
In response to foreign pressure, Pakistan could threaten any of these interests. For example, it can discontinue cooperation on nuclear safety issues or suspend Pakistan-India nuclear confidence-building measures. Hence, it is highly unlikely that Pakistan will fully sever its support for and desire to control its terrorist networks, after being enrolled in the FATF watch-list. Most likely, the country will claim it is no longer assisting those militant groups and will temporarily reduce its level of support for them while waiting to increase it later again.
The only possible solution for Pakistan to dramatically cut its support for terrorist organizations is a scenario where the Inter-Services Intelligence (ISI), and the overall military apparatus loses its ubiquitous grip and control over the Pakistani government and becomes subordinated to an enlightened, efficient, and accountable civilian leadership. That means that both the Pakistani military and the country’s civilian politicians would have to undergo a radical transformation and the State develops the political and physical resources, and financial means, to tackle its internally-sponsored rapidly spreading terrorist groups.
State-sponsored terrorism against neighbouring countries, mainly against India, Indian Administered Jammu & Kashmir and Afghanistan, and against national religious and ethnic minorities, does not reflect a sudden change in the current situation. Over the last couple of years, thousands of secular intellectual Pakistani citizens - University professors, teachers, artists, musicians, poets, human rights activists and journalists have been murdered, apprehended, routinely disappeared or punished for asking inconvenient questions.
Once the young, well-educated, technocratic and secular segments of the population that try to fight back the warlords, insurgents, oligarchic powerbrokers and powerful military establishment, are suppressed by the thirsty-for-control and dominion influential layers of the Pakistani society, any fundamental change to Pakistan’s internal power distribution and strategic calculus, is facing failure, risking its very own destructive annihilation.

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