It’s important to understand the FATF set standards, and they are working since 1989. Initially, they started on anti-money laundering focus, and then were expanded to terrorism financing and now I wouldn’t be surprised if the focus shifts to corruption-related illicit flows because that’s the global trend.
Regarding Pakistan, they [FATF] don’t seem to have any issue with our legislation. Though, we have added some clauses in haste. But, their major concern is on the institutional and conviction side and linked to two specific outfits which are Jamat ud Dawa (JuD) and its welfare wing the Falah-i-Insaniat Foundation (FIF).
Being a signatory to the UN Resolutions, Pakistan is required to freeze accounts and assets of these outfits. Historically, when FATF’s recommendation comes against Pakistan’s inability to implement the legislation prescribed. It affects neither borrowing from international markets or institutions like IMF or World Bank.
Moreover, you will also have to look what was the world mood back in 2012 and what is it now? So, hypothetically, it could have an impact in terms of stringent conditionality. US treasury is as an important and influential member of IMF board. Pakistan has been on the Fund’s program, what if US treasury says, Pakistan would not be provided with additional funds or advisory unless, it complies by certain terrorism financing-related conditions as advised by the FATF.
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In such a situation, Pakistan will have no choice but to adhere to remain solvent. That is a potential futuristic proposition, where you cannot rule out pressure. However, if Pakistan is on FATF watch list, it neither stops it from reaching out to an organization, nor capital markets for funds. In addition, it is unlikely to have an impact on our credit rating.
But, crucially, there’s a serious impact of perception due to extensive media hype. It has an impact related to financial transactions. Lots of Central banks would be cautiously looking at financial flows going in and out of Pakistan. In the Foreign Office, many people might not even know what FATF actually is.
The role of our regulatory institutions like SBP and SECP remained questionable. For example, SECP has no chairman. What action did government take in last 6-months? How many people do we [Pakistan] have in SBP who have international stature, who inspire confidence in international markets?
At the end of the day, if international people are not reaching you, you need to appoint credible people as head of regulatory bodies who reach out to them, who pre-emptily take measures, rather than reacting to what is happening. If you were in contact with them in last 8-months, you would know 6-months in advance, what’s happening?
There are two sides to this too. We cry foul and talk about conspiracies. We must understand, others only conspire due to our internal weaknesses. The fact of the matter is, institutionally, Pakistan was not prepared for it. Institutionally, we don’t have right people to do economic diplomacy with the world.
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Because of that, it is now been given unnecessary media hype, both in Pakistan and outside the country. Even in FATF, who was representing Pakistan? Finance and Foreign Minister were tweeting separately. It is a specifically technical matter. Governor SBP should be authorized to deal with it.
But, we have made it a political issue, so people are doing point-scoring over it. World has changed now, eight countries have merged their foreign offices with their trade ministries, because, foreign policy has now become a trade policy. But, since we have security led foreign policy, then we only have training in it.
Pakistan’s PM should have made a task force by now and would have passed a directive to give recommendations in next-30 days to get out of this situation. Moreover, put such strong name in the task force that FATF takes you [Pakistan] seriously.
If you would put low level and inexperienced bureaucrats, no offence to their services, nobody would take them seriously. This is why sometimes, putting aside politics, one has to give such tasks to experts, but if you will put the incompetent person in everything, based on loyalties and then you will cry foul or blame others then it’s not going to work.
Haroon Sharif has been Regional Advisor to the World Bank for South Asia and led major economic diplomacy initiatives to improve regional connectivity. He also held positions as a Senior Advisor to UK’s Department for International Development and remained Executive Director of the Securities and Exchange Commission of Pakistan. He played an active role in global financial scene and remained part of FATF, G-7 financial task force, FIRST Initiative at the World Bank and other key forums.