Global Isolation Of Pakistan On The Issue Of Terror Funding

The Financial Action Task Force (FATF), a global watchdog for terror financing, that kept Pakistan on the Grey List for an extended period till February 2020, had warned in October 2019 that Islamabad would be put on the ‘Black List’ if it did not comply with the remaining 22 points in a list of 27 questions. Pakistan submitted a report comprising answers to 22 questions to the FATF on December 2019.


  • Terrorism is a global threat and various parts of the world are experiencing its repercussions. India has taken a strong objection to the growing menace of terrorism in its neighborhood where it is given state shelter. In this light, exposing Pakistan and curbing its state patronage to terror is an active ingredient of Indian foreign policy.
  • India’s strong anti- terrorism posture on a global scale has been acknowledged due to emergence of India on the world platform. A logical corollary of this is the placement of Pakistan in the grey list of Financial Action Task Force (FATF) and looming danger of slip to black list.
  • FATF President (from China) Xiangmin Liu said, “Pakistan needs to do more and it needs to do it faster. The FATF strongly urges Pakistan to swiftly complete its full action plan by February 2020, otherwise, should significant and sustainable progress not be made across the full range of its action plan by the next Plenary, the FATF will take action”.

Mutual Evaluation Report 2019

The Asia/Pacific Group on Money Laundering (APG) published its report titled “Mutual Evaluation Report 2019” on money-laundering and terror-financing. It has 10 parameters for ‘Effectiveness Ratings’ and 40 parameters for ‘Technical Compliance Ratings’.

  • Of the ten effectiveness ratings, Pakistan was found “low” in nine areas.
  • Of the ‘Technical Compliance’ parameters, Pak was found “compliant” in only one.

The report made a strong case of placing Pakistan in the blacklist. However, not getting into blacklist is temporary for Pakistan as review will be again in February 2020 and Pakistan will remain on grey list as it requires the support of 15 members of FATF.

Impact of Black Listing

  • Capital Inflow: The potential blacklisting of Pakistan by the Paris-based Financial Action Task Force (FATF) could have implications for capital inflows to the country.
  • Freeze of International Grants and Loans: It will also affect various grants that it get from nations like USA and slow progress in refinancing/re-profiling loans from major bilateral creditors.
  • Image: It will tarnish the image of Pakistan as a country with terror funding links.
  • Credibility: It will lose credibility on international fora that it uses to fuel anti-India agendas.
  • Domestic Risks: While discussing the domestic risk, the report noted that pushback on policy initiatives was expected from the vested interest groups and the lack of majority by the ruling party in the upper house may also affect the approval of new legislation. It may halt the growth of nation and affect its fiscal consolidation.

Way Forward

  • Pakistan should fall in line with the international standards and provide necessary answers to debunk the allegations of terror funding.
  • Maintain transparency in its financial matters and their use to deter future allegations. Fiscal consolidation must be achieved on the back of high-quality reform measures to ensure financial sustainability along with international credibility.