Pakistan won an extra four months to meet international anti-terrorism financing norms on February 21 when a global dirty money watchdog decided to keep the country off its blacklist for now.

After Pakistan missed multiple previous deadlines, the Financial Action Task Force (FATF) said it was concerned that Islamabad had again failed to complete an internationally agreed action plan.

“The FATF strongly urges Pakistan to swiftly complete its full action plan by June,” the FATF said in a statement issued after a meeting in Paris. “Otherwise, should significant and sustainable progress especially in prosecuting and penalising terrorism financing not be made by the next plenary, the FATF will take action.”

It said such action could include calling on its member states to order their financial institutions to give particularly rigorous attention to business relations and transactions with Pakistani clients.

Inclusion on the FATF blacklist would put Pakistan in company with Iran and North Korea and mean it would be shunned by international financial institutions.

Pakistan has long been accused of nurturing and supporting Islamist militant groups for use as proxies to project power in South Asia, particularly towards India and in Afghanistan. Islamabad denies such accusations.

But with a minimum of three votes by FATF members needed to avoid the organisation’s blacklist, Pakistan has been able to avoid punishment so far thanks to support from major ally China and other friendly countries including Malaysia and Turkey.

“The Government of Pakistan stands committed for taking all necessary action required for completing the remaining items in the Action Plan,” it said in a statement after the FATF decision. “A strategy in this regard has been formulated and is being implemented.”

Islamabad and counter-terrorism officials say Pakistan has done much to comply with FATF’s 27-point agenda, which included an unprecedented conviction for terrorism financing of Hafiz Saeed, chief of the Pakistani Lashkar-e-Taiba (LeT) militant group.

In 2018, the FATF placed Pakistan on its ‘grey list’ of countries with inadequate controls over terrorism financing, which made foreign firms more cautious about investing in Pakistan.

A move onto the blacklist could deal the South Asian power a serious financial hit at a time when its economy is grappling with a balance of payments crisis.

The most crucial aspect of compliance with FATF in Pakistan’s case would be steps to effectively prevent militant groups from openly operating and raising funds, as the LeT has done from Islamic charities.

The FATF has pushed Pakistan to adequately identify, assess and understand risks associated with jihadist groups present in the country such as LeT, Islamic State, al Qaeda, Jamat-ud-Dawa and Jaish-e-Mohammad.

Iran placed on terror funding blacklist

The FATF has placed Iran on its blacklist after it failed to comply with international anti-terrorism financing norms, a move that will deepen the country’s isolation from financial markets.

The decision came after more than three years of warnings from the FATF urging the Islamic Republic to either enact terrorist financing conventions or see its reprieve from the blacklist lifted and some counter-measures imposed.

“Given Iran’s failure to enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, the FATF fully lifts the suspension of counter-measures and calls on its members and urges all jurisdictions to apply effective counter-measures,” the group’s 39 members said in a statement.

These would entail more scrutiny of transactions with Iran, tougher external auditing of financing firms operating in the country and extra pressure on the few foreign banks and businesses still dealing with Iran.

Foreign businesses say Iran’s compliance with FATF rules is essential if it wants to attract investors, especially since the US reimposed sanctions on Tehran in 2018 after quitting a 2015 nuclear deal with Iran and other big powers.

Myanmar on money-laundering watchlist

The FATF has placed Myanmar on its money-laundering watchlist, urging the country at the heart of Asia’s illicit drug-producing Golden Triangle to boost its efforts to seize crime proceeds.

The decision to include Myanmar on the FATF’s ‘grey list’ puts the Southeast Asian nation on notice to make good on a “high-level” commitment to strengthen its anti-money laundering regime.

In a 2018 report, the FATF found “Myanmar faces extremely high levels of proceeds-generating crimes” and was “exposed to a large number of very significant money-laundering threats”.

Transnational drug syndicates have long operated in Myanmar’s north and northeastern borderlands, setting up illicit drug production facilities in semi-lawless enclaves controlled by armed ethnic groups.

Myanmar’s government is in peace talks with most of these groups. Some but not all have been incorporated into border guard forces allied to the military.

Arms trafficking, illegal jade mining and unlawful logging are also big money-spinners for organised crime, the 2018 report added.

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