Financial Action Task Force: a tool of Lawfare against Pakistan

In Blog
March 10, 2021
Mehreen Naushad
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Does the employment of the Financial Action Task Force (FATF) against Pakistan constitute as lawfare? In recent years, lawfare is increasingly seen as an effective instrument of state power that can be used to acquire a disproportionate advantage within the international system, in particular over that state’s adversaries. Under international law, the scope, nature and

Does the employment of the Financial Action Task Force (FATF) against Pakistan constitute as lawfare? In recent years, lawfare is increasingly seen as an effective instrument of state power that can be used to acquire a disproportionate advantage within the international system, in particular over that state’s adversaries. Under international law, the scope, nature and employment of lawfare focuses on the influence of the state within the international system, its interests, and the purpose it is seeking to achieve through lawfare. Whereas, in international politics the existence of lawfare is seen through the diplomatic efforts and the signing of international laws and agreements in order to develop customary international norms for the preservation of existing rights of the state, or otherwise that may prove beneficial to its national interests.

In the case of Pakistan, the events in the last few years make it evident that Pakistan is the target of a consistent and successful lawfare strategy of foreign powers and institutional bodies such as FATF. In 2018, placed Pakistan on its ‘Jurisdiction under Increased Monitoring’ list, also known as the grey-list due to structural deficiencies in Pakistan’s anti-money laundering and counter-terrorist financing regulatory framework. In case of Pakistan failing to comply with the FATF standards, they may be placed under FATF’s ‘High-Risk Jurisdictions subject to a Call for Action’ or blacklist, and therefore may be subject to economic sanctions and other prohibitive measures by not only FATF member states, but also other international organisations such as International Monetary Fund and the World Bank.

The Financial Action Task Force is an international policy making body that has developed a set of international standards and measures to combat money laundering and counter-terrorist financing. It undertakes assessments of compliance and review the level of a country’s anti-money laundering (AML) and countering the financing of terrorism (CFT) system. In recent years the role and significance of FATF has increased exponentially. FATF enjoys unprecedented power in the international arena that influences the behaviour of states. It is the judge, jury and executioner when undertaking review of compliance. The same may be attributed to not only international organizations such as the United Nations conferring powers on it through laws and resolutions, but also the role of world powers in influencing FATF policy such as the United States.

The geo-political landscape in the last decade has changed much with China and US engaging in trade wars, and Pakistan distancing itself from US, and instead seeking assistance from China to meet its military and economic needs. The increase China-Pakistan nexus has forced US to favor India in an attempt to balance the power in South Asia.

Since 9/11, the international community has adopted a zero-tolerance policy towards terrorism and terrorist financing. This global narrative has played a huge role in India maligning Pakistan’s standing in the international arena. India has been consistently advocating for Pakistan to be a state sponsoring terrorism. This narrative built by India is links the rebels in Jammu and Kashmir to proscribed outfits. It provides legitimacy to India’s claim and instead is successful in painting Pakistan’s policy of favoring terrorist networks.

This outlook was further reinforced by the Trump Administration foreign policy concerning Pakistan which primarily revolved around the eradication of the terrorist networks in Pakistan. The US-India nexus was successful in employing a robust lawfare attack against Pakistan in FATF’s meeting in February 2018, following which Pakistan was placed on FATF’s grey-list.

India has been consistently reinforcing this narrative as evidenced following the Pulwama attack in Kashmir in 2019. India craftily built on the narrative of Pakistan as a state-sponsoring terrorism. It made a successful case of Pakistan supporting terrorist networks i.e. the Jaish-e-Mohammad (JeM) to sponsor terrorism in India despite lack of evidence. The same did not do Pakistan any favors and instead cost Pakistan heavily as the incident came about during the time Pakistan’s FATF review was ongoing.

It is evident from the way international powers are reacting to Pakistan is a cause for concern. The US has been opposing granting Pakistan IMF bailout on the ground that the secured amount is likely to be utilized for repaying China’s debt. With the current trade war between China and US, it is unlikely that US will agree to any action that favors China. Furthermore, India holds albeit a limited vote in the IMF, but its strong bilateral relations with US and other European powers can place Pakistan in harm’s way.

The same is already evident through India’s success in convincing the US, UK and France to declare JeM Chief, Masood Azhar a global terrorist under UNSC Resolution 1373. Moreover, India has also started claiming credit for any positive action taken by Pakistan against terrorist networks, as seen in the case of Pakistan’s National Security Council reinstating the ban on JeM and other proscribed organisations. India in this case claimed that the pressure they placed on Pakistan has forced them to take this positive action.

With the FATF review in June 2021, Pakistan should not expect US and India to curb their efforts in casting Pakistan in a negative light. The implications of being black listed are grave. While India may not be powerful enough to single handedly force FATF to blacklist Pakistan, the action to black-list Pakistan by FATF is being lobbied by India who is a co-chair of the joint group which is heading the assessment process. Though, we are diplomatically countering the lobbing of India but still India’s influence remains heavy in the investigations against Pakistan. Hence, there is a a critical need for Pakistan to raise its capacity in dealing with economic lawfare.