Context: In an attempt to be dropped from the Financial Action Task Force’s grey list, Pakistan has banned 88 new terrorists, in compliance with the new list issued by the United Nations Security Council (UNSC). The banned terrorists include Hafiz Saeed, Masood Azhar and Dawood Ibrahim. Paris-based FATF put Pakistan on the grey list in June 2018 and asked Islamabad to implement a plan of action by the end of 2019, but the deadline was extended later due to the Covid-19 pandemic. The Pakistan government issued two notifications on August 18 announcing sanctions on key leaders of terror outfits such as 26/11 Mumbai attack mastermind and Jamaat-ud-Dawa (JuD) chief Hafiz Saeed, Jaish-e-Mohammed (JeM) chief Masood Azhar, and underworld don Dawood Ibrahim.
Background

• The crucial plenary meeting of the Financial Action Task Force (FATF) has recently concluded in Paris. 
• One of the important aspects of the agenda is to decide whether Pakistan stays in the grey list in which it was placed by the FATF in June 2018. 
• A sub-group of the global terror financing watchdog FATF recommended the continuation of Pakistan in the ‘Grey List’ for its failure in checking terror funding. 
• Pakistan is said to have informed the FATF that Jaish-e-Mohammad founder Masood Azhar and his family are missing, which seems to be orchestrated by Pakistan to avoid being downgraded to the blacklist.

Current Scenario

• Seeking to wriggle out of the FATF’s grey list, Pakistan has imposed tough financial sanctions on 88 banned terror groups and their leaders, including Hafiz Saeed, Masood Azhar and Dawood Ibrahim.
• The government has ordered the seizure of all movable and immovable properties of these outfits and individuals, and freezing of their bank accounts.
• The Pakistan government has proscribed 88 leaders and members of terrorist groups, in compliance with the new list issued by the United Nations Security Council (UNSC).
• Though various sanctions were in place against almost all of those listed by the UNSC, the government through the new notifications consolidated and documented the previously announced measures.
• It is believed that the latest move by the Pakistan government is part of its efforts to wriggle out of the grey list of the global money laundering and terrorist financing watchdog FATF.

Larger Background

• The FATF is the international watchdog working against money laundering and terror financing.
• Money laundering and financing of terrorism, both are considered as financial crimes. Money launderers and terrorists do not report their crimes. It is very difficult, if not impossible, to measure these crimes directly.
• FATF lays down the global standards for combating money laundering and terror financing. Countries are expected to infuse these standards into their respective national legislation.
• Countries are evaluated for their performance and failure to comply can invite FATF action and such countries can be placed on the Grey List and the Black List.
• Pakistan was placed on the Grey List by the FATF in June 2018 and was given a plan of action to be completed by October 2019 or face the risk of being placed on the blacklist along with Iran and North Korea.
• This is not the first time Pakistan has found itself on FATF’s grey list. The country faced a similar situation in 2008 and from 2012 to 2015.
• In its last meeting in October 2019, the FATF had noted that Pakistan had addressed only 4 out of 27 action points given to it to control funding to terror groups.

How would recent geopolitical changes influence Pakistan’s position?

• The larger geopolitical nature surrounding the FATF meeting has changed, this is due to multiple factors such as withdrawal of the US troops from Afghanistan, Pakistan is the mediator between the USA and Taliban, for which the US President has voiced his appreciation.
• Pakistan has also gathered the support of Turkey and China.
• The issue of Pakistan funding terror groups in Pakistan occupied Kashmir (PoK) such as Lashkar-e-Taiba, Jaish-e-Mohammad and Hizbul Mujahideen is an issue that India would have to deal with on its own.
• The other countries agree that Pakistan should work towards reducing terror-financing, however, they also look at Pakistan as a strategic ally for their respective interests. These geopolitical dynamics will affect decision making at the FATF. 
• The Taliban is considering making a deal with Pakistan, and it could be finalized before President Trump’s scheduled visit to India.
• Pakistan has enabled the Lashkar-e-taiba, Taliban, Haqqani group, Al-Qaeda and other terror groups to easily raise finances inside and outside the country. Despite international pressure, Pakistan has failed to act against it.
• They have also not done anything about their banking system, which is very prone to money laundering.

Will Pakistan get out of the FATF grey list and escape from being moved into the black list?

• Pakistan has failed to implement the actions suggested by the FATF, especially on the aspect of money-laundering and terror financing.
• For a country to not be blacklisted, three countries have to vote in favour of the country. Malaysia, Turkey, and China are supporting Pakistan. Thus, the chances of it being downgraded to the blacklist are very slim.
• However, Pakistan will continue to remain in the Greylist, as it needs the support of 14-15 countries to come out of the Greylist. This isn’t possible as Pakistan hasn’t done much to improve its condition.
• India’s concerns are valid as there have been no efforts from Pakistan to consider India’s point of view.
• Zaki-ur-Rehman Lakhavi isn’t being sentenced or punished for his involvement in the 26/11 attacks in India.
• There are high possibilities that Pakistan might be retained in the grey list, but Pakistan is in a huge economic crisis. Its inflation rate is in double figures. Being retained in the grey list could indicate further economic troubles for the country.
• Keeping Pakistan in the greylist would cause the multilateral lenders such as IMF, the World Bank, and the European Union to hesitate before giving Pakistan a loan, which would make its economic situation precarious.

Does the Geopolitics undercut the efforts of taking on terror funding by FATF?

• FATF was founded to put a stop to terror financing, however, its members are politically influenced based on their respective interests.
• India has taken a firm stand on Pakistan’s efforts at curbing terror financing, while the other countries, although they agree with India, would still look at Pakistan from their strategic prism.
• The conviction of Hafiz Saeed was a watershed movement, as this is the first time that he has been convicted despite the evidence against him being present for a long time. A lower court dealing with Hafiz Saeed’s case has convicted him to five and a half years of punishment on two charges of terror funding.
• Most countries are of the view that sufficient pressure has been put on Pakistan and that an alternative way has to be adopted to encourage Pakistan to take action against terrorism.

Geopolitics v/s Actions which need to be taken

• The decisions taken would be a reflection upon the reports presented to the decision-making committee and the other organizations present during the FATF meeting. 
• Political support: Turkey and China have made it clear that they would support Pakistan, while Malaysia is still inclined towards Pakistan. 
• Geopolitical equations might save Pakistan from going into the blacklist.
• The only countries blacklisted so far are Iran and North Korea.

Possible challenges which India might have to face

• India has suffered at the hands of terrorists who were funded by Pakistan on multiple instances.
• It has conveyed diplomatically that if Pakistan isn’t asked to act against terror-financing, then there would be global implications.
• India should highlight the lack of action against Masood Azhar, who had earlier been sheltered and protected by Pakistan and has now been reported missing, rather too conveniently.

Suggestions

• The first lesson in diplomacy is that “A policy can never be static, it has to be dynamic.” 
• The policy needs to keep changing depending upon the situation in which it is contextualized. Thus, India has been trying to isolate Pakistan through diplomatic pressures and should continue to do so. 
• India should put thrust on Pakistan and the international community to take action against terror-financing.
• FATF took a step in that direction, after the Mumbai attack, as citizens of many countries were affected in that attack. 
• India should keep adapting to the changing situation while trying to be an active member of all the international fora.

Additional Recommendations

• Pakistan had been given a deadline of September 2019 to implement the 27 point action plan that included shutting down all access to funding of the United Nations Security Council (UNSC) designated terrorist groups.
• Pakistan’s adherence to this plan and timeline was reviewed by the FATF during its recent summit in Paris which was held in Feb 2020.
• FATF concurred that Pakistan has failed to complete its action plan in line with the agreed timelines and in light of the terror financing risks emanating from the jurisdiction, Pakistan has been retained on the “grey list” of the Financial Action Task Force (FATF) for another four months, with a stern warning from the FATF to implement the 27-point action plan it has been given, by June 2020 or face the risk of being put on the “black list”.

About Financial Action Task Force

• The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 during the G7 Summit in Paris.
• 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.
• Its Secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris.
• Member Countries: As of 2019, it consists of thirty-seven member jurisdictions. India is one of the members.
• The FATF currently has 39 members including two regional organisations – the European Commission and Gulf Cooperation Council.

FATF has two lists:

• Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.
• Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.

The FATF Plenary is the decision making body of the FATF. It meets three times per year.
Road Ahead

• India has diplomatically isolated Pakistan on the international fora and exposed its links to terror funding. Changes in geopolitical equations might give Pakistan a breather, but India needs to act swiftly. 
• It needs to maintain pressure on Pakistan and on the international fora, to expose the wrong-doings of Pakistan as far as terror funding is concerned.
• India should focus on emphasizing the urgency to control terror-financing and its related activities by Pakistan for the prevalence of world peace. India should also ensure that Pakistan should not be removed from the grey list.