The FATF & Pakistan:
A timeline
22
nd
February, 2020
Usman W. Chohan, MBA, PhD
Abstract: T
he aim of this paper is to situate the
engagement between Pakistan and the Financial Action Task
Force in a chronologically-ordered fashion that depicts the
major events between February 2019 and February 2020, with
an equal effort to present the prelude of events since the
FATF’s creation in 1989. This helps to address a gap in the
policymaker effort to contextualize the long-horizon of
international financial oversight and lack thereof as it
pertains to Pakistan’s forced place in the FATF ‘grey
list,’ as of 2020.
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Table of Contents
List of Abbreviations 2
The FATF & Pakistan:
A timeline 3
1989-2009 3
2010-2018 5
2019-2020 (Feb) 7
References 13
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List of Abbreviations
AML - Anti-Money Laundering
APG - Asia-Pacific Group (local mirror of FATF)
BCCI - Bank of Credit and Commerce International
CASS - Centre for Aerospace & Security Studies
CFT - Countering the Financing of Terrorists
EFF - Extended Fund Facility
FATF - Financial Action Task Force
FMU - Financial Monitoring Unit
IMF - International Monetary Fund
UNGA - United Nations General Assembly
USSR - Union of Soviet Socialist Republics
A Note on Terminology*1
-
1
T
he terms ‘greylist’/’grey list’ and ‘blacklist’/’black list’ are
colloquial in nature, and are not specifically used by the FATF
itself to describe countries. They are thus presented in single
quotation marks throughout the paper.
The paper has been formatted as a chronological study situated in a
contextual timeline. The concentration of the paper is on the
period Feb 2019 - Feb 2020, with backdrop of previous decades
expressed in years, and this period of focus in months.
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The FATF & Pakistan:
A timeline
1989-2009
● 1989 -The Financial Action Task Force (FATF) is created as
an inter-ministerial body to work towards stemming the
anticipated flow of black money from the Communist world
into Western banking systems. It is not backed by any
international treaty and has limited membership to pursue
specific AML objectives.
● 1991 -
The dissolution of the Soviet Union sparks a massive
outflow of assets usurped by private interests that were
formerly held in the public trust
● 1991 -
The BCCI Bank - an international banking titan
founded by Pakistani financier Agha Abedi, is dissolved
after the intense lobbying of private American banking
interests (particularly Bank of America), wary of a rival
in the Third World. The pretext for the dissolution is
AML/CFT due to BCCI’s trusteeship of funds for Palestinian
liberation organizations. It is the largest liquidation in
history.
● 1994 -
New York, Frankfurt, Delaware, Zurich, London, and
other Western financial capitals account for astronomical
amounts of capital siphoned from the developing world.
International press at the time begins to draw attention to
the new post-Cold War issues of financial normalization and
the shadow banking systems that are running rampant.
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● 1997 -
Pakistan issues the Anti-Terrorism Act to limit the
funding channels of CFT.
● 2001 -
The FATF’s focus is diverted from post-Communist
societies towards Muslim countries as part of a larger
American effort to “spread freedom,” resulting in wanton
destruction and loss of life in the Middle East and Western
Asia.
● 2004 -
FATF produces its 40 recommendations that remain its
standard-issue list thereafter.
● 2007 -
Anti-Money Laundering Ordinance issued in Pakistan
● 2008 -
the Western banking system is roiled by the subprime
mortgage crisis, stemming in large part from financial
opaqueness and wizardry spreading a contagion of risk
across the international system.
● 2008 -
FATF issues a major early report with concerns about
AML/CFT implementation in Pakistan
● 2009 -
Bank of America, as a jealous former rival to the
BCCI, itself collapses due to the systemic pressures of the
GFC and propped up to be merged with Merrill Lynch
The period 1989-2009 is thus characterized by a rampant growth
of black money worldwide. This cancerous spread, with its
uniquely pernicious effects on developing countries, but with
the complicity of the banking systems of developed countries,
helps to worsen the perceptions of globalization as a zero-sum
phenomenon. While much resistance is mustered by the Third
World, the culmination of poor financial oversight, greed,
neocolonialism, and carelessness in Western countries,
particularly in the United States, festers into a boil in the
2009 financial crisis.
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2010-2018
● 2010 -
Pakistan enacts the Anti-Money Laundering Act
● 2010-2014
- The Russian Laundromat scheme is initiated by
Western banks, particularly the Deutsche Bank (Germany), in
connivance with Mafia interests in former-USSR countries,
to siphon $20-80 billion dollars into Western banks.
● 2012 -FATF produces a revision of its recommendations for
working groups on evaluation and implementation
methodology.
● 2012 -
US-Pakistan relations hit their lowest level
following the American Salala massacre and OBL. The FATF
concurrently puts Pakistan on its ‘grey list’ of monitored
jurisdictions.
● 2013 -FATF produces its paper on the methodology for
assessing technical compliance with the FATF
recommendations and the effectiveness of AML/CFT Systems
● 2015 -Pakistan enacts the Anti-Money Laundering Amendment
Act as part of measures to get off the ‘grey list’. It
exits the ‘grey list’ that year. Although bureaucrats,
policy experts, and ministry officials in Pakistan are
aware of the danger that the FATF poses, scant literature
is produced for the public that would draw lessons from the
FATF’s ‘grey listing’ episode for future incidents.
● 2015 -
China and Pakistan jointly announce the creation of
the China-Pakistan Economic Corridor (CPEC), with a $62
billion allocation for infrastructure and investment
projects that would symbolize the fraternal ties of both
countries and spearhead China’s vision for a renewed Silk
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Road (One Belt One Road, OBOR). This initiative is met with
resentment in India and the United States.
● 2016 -
The Panama Papers leak reveals the extent to which
Western banking systems and elites collude and conspire to
bypass international regulations and create a parallel
system of wealth manipulation
● 2016 -
A fascist ruling party in India, the Bharatiya
Janata Party (BJP), initiates a poorly-conceived and
poorly-executed “demonetization scheme” to eliminate
lower-denomination banknotes in India. This measure
decimates the livelihoods of several millions of households
and disproportionately affects farmers and the urban poor.
● 2017 -
The Organized Crime and Corruption Reporting
Project (OCCRP), a civil society project which does the
actual investigative work on the Russian Laundromat scheme
(instead of the FATF, which has lost its focus),
demonstrates the scale of the AML/CFT risk that the FATF
should have discovered ($20-80bn) but didn’t.
● 2017 -
Daphne Galizia, the journalist who led the Panama
Papers investigation, is assassinated by a car bomb in
Malta in October.
● 2018 -
Pakistan is put on the ‘grey list’ in June as part
of a renewed effort by the US and India to conspire to
subjugate Pakistan through economic violence. Impossible
standards are imposed on the country on a very short
deadline, which even OECD countries would struggle to meet.
● 2018 -
Countries such as Afghanistan and India, whose black
economy in relative (Afghanistan) or absolute (India) terms
would far outstrip Pakistan, are conspicuously ommitted
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from the FATF’s ‘grey list.’ At the same time, individual
correspondence between a Pakistani senator and the
(American) head of the FATF reveals the incongruity of the
FATF’s position.
Looming in the shadow of the 2008-09 global financial crisis,
the decade 2010-2019 is characterized by disenfranchisement with
the institutions of globalization. Populist movements break out
across the world, even in the United States which has largely
been a culprit in fomenting the inequalities
betweencountries -
now having to face the political ramifications inequalities
within countries (including itself). The decade is also
characterized by a complete deterioration in relations between
the United States and Pakistan, thus setting various instruments
of American power, including the now largely irrelevant and
inept FATF, into motion against Pakistan. In the meantime, the
FATF misses out completely on the original focus of its creation
- the former USSR countries, where Western banks are deeply
involved in siphoning wealth off to the detriment of these
societies. The election of Donald Trump and other autocratic
rulers thus sets the tone for a combative decade to ensue in
financial oversight.
2019-2020 (Feb)
● 2019 (Feb) - I
ndia launches a false-flag operation in
mid-February by killing 40 low caste officers and pointing
a finger at Pakistan without evidence. Seeking to generate
domestic attention for votes in the upcoming 2019 election,
the BJP orders its pilots to violate a sovereign border
with Pakistan. The Pakistan Air Force ably neutralizes the
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Indian threat, shoots down Indian planes, and captures an
Indian pilot, Wing Commander Abhinandhan, alive. To the
humiliation of the BJP, Pakistan hands the pilot back as a
“gesture of peace” and an act of mercy. The Pakistan Air
Force’s successful operation is named
Operation Swift
Retort.
● 2019 (March)-
India escalates its hybrid war strategy and
weaponizes the mirror body of the FATF, the Asia Pacific
Group (APG), to sanction Pakistan further into the ‘FATF
blacklist.’ At the same time, the Indian black economy is
estimated to be half a trillion dollars, larger than the
entire economy of many countries and a far better candidate
for blacklisting, if the FATF were not a biased political
rump of a tool by this point.
● 2019 (March) -
The Centre for Aerospace and Security
Studies (CASS) produces a detailed research paper on the
FATF’s workings that deconstructs its nature as a
pseudo-legitimate body with no external accountability, no
recourse for its verdicts, and no binding treaties for
enforcement. The paper highlights the hypocritical and
dubious nature of the economic violence perpetuated through
the hijacking of the FATF and its mirror bodies by
countries such as India. However, it also draws attention
to the need for systemic economic reform in Pakistan to
reduce the black economy and improve the oversight of
financial life in the country. Furthermore, it highlights
that the Pakistani laws regarding AML/CFT2 are in fact m
ore
2
A list is provided at the end of this paper.
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stringent
than the stipulations of the FATF, but the problem
has been in the implementation of those laws.
● 2019 (April) -
The CASS working paper on the FATF is
presented to a large audience of civil and military seniors
in Islamabad, Pakistan. This underscores the need for
collective action to a vital threat being posed in the
domain of economics to weaken Pakistan. It also
recalibrates a wider Pakistani perception about the
supposed legitimacy of the FATF.
● 2019 (May) - T
he largest German bank, the prestigious
Frankfurt outfit known as Deutsche Bank, is slammed with
heavy fines for its collusion in international money
laundering and for its role in the Russian Laundromat
scheme.
● 2019 (1H) -A culmination of deficits ostensibly forces
Pakistan to seek a bailout from the IMF - but the need to
go to the IMF remains a debatable question. The IMF imposes
stringent requirements that reduce the government’s
capacity to spend on human development, while the size of
the IMF’s Extended Fund Facility (EFF) is nonetheless a
paltry sum. Negotiating from a position of weakness, the
Pakistani government accepts the wrenching IMF terms, which
also stipulate a need to conform to FATF recommendations,
thereby lending legitimacy to an otherwise largely inept
political tool masquerading as an organization.
● 2019 (June)- Building upon a more proactive policy
approach towards resolving the scourge of the FATF,
Pakistani policymakers, now armed with better research and
more vocal critiques, begin calling out the FATF for its
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dubious intent. The Foreign Minister of Pakistan, Shah
Mahmood Qureshi, publicly denounces the FATF’s ‘grey
listing’ and promises actions to get the country out.
● 2019 (June) -
detracting from its role as a pliant weapon
for violence against smaller countries, the FATF issues
guidelines for virtual assets such as cryptocurrencies.
● 2019 (August) -India deliberately violates international
law, and finally shreds any pretensions of being a
“democracy,” by annexing the disputed region of Kashmir. It
puts the entire valley into a permanent lockdown and
imposes a brutal police state on the Kashmiri people. It
also imprisons the puppet leaders that had long betrayed
the Kashmiri people at its behest.
● 2019 (August) - O
n the Indian mainland, the government
imposes a Citizenship Amendment Act to explicitly exclude
Muslims, resulting in massive protests across the Indian
mainland.
● 2019 (August) - P
akistan exercises restraint despite
mounting pressures to liberate the oppressed peoples of
Kashmir, but mobilizes an international campaign to shed
light on the fascist acts and proclivities of the BJP. This
leads to severe international condemnation of the Indian
government, but does not dissuade it from its maniacal
fascist bent.
● 2019 (Sept) -The Prime Minister of Pakistan, Imran Khan,
makes a rousing speech at the United Nations General
Assembly (UNGA), which raises the world’s conscience
regarding the plight of Occupied Kashmir and the monstrous
nature of the Hindu supremacist government in Delhi. Yet
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his speech also makes specific mention of the FATF,
pointing out that the work by the FATF and India’s meddling
was an absolute red-flag.
● 2019 (Oct) - T
he IMF concludes an important five-day visit
of Pakistan and deems that it is making progress on the
stipulations of the EFF. Meanwhile, foreign think tanks
begin to assimilate the arguments of the CASS working paper
into their analyses of the FATF.
● 2019 (Oct)
- Pakistan’s allies begin to voice the language
used in the CASS working paper about the “politicization”
of the FATF. The Chinese Deputy Spokesperson at the Foreign
Ministry uses the same language to assure the world and
Pakistan that China will not allow the FATF to turn into a
political weapon.
● 2019 (Nov-Dec) - P
akistan mobilizes many different
departments and ministries to successfully achieve the
points raised by the FATF. At the same time, it plays an
instrumental role in stabilizing Afghanistan such that the
US can make a face-saving retreat from the American defeat
in its longest-ever war. It is thought that this
peace-broker role might reduce the American animosity
towards Pakistan.
● 2020 (Jan) - P
akistan’s FATF case is heard at a
semi-plenary meeting in Beijing, where its progress is
lauded on many points. It is anticipated that Pakistan will
have made substantial progress on 10-15 points by the time
that the Feb 16-21, 2020 plenary occurs.
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● 2020 (Feb) -Other leaders including Erdogan of Turkey
assure Pakistan of support during the upcoming FATF
plenary.
● 2020 (Feb)- a plenary of the FATF is held in Paris from
Feb 16-21. Following careful negotiations and a strong case
for Pakistan’s significant progress across a range of
points, the FATF’s consensus is to give Pakistan greater
time (June 2020) to more fully comply with the
recommendations. Pakistan was found to have made
significant progress on 14 points out of the required 22.
These included cash smuggling controls, airport checks, a
more informed judiciary, better State Bank audits, a more
informed banking system, a better functioning Financial
Monitoring Unit (FMU), a regularization of seminaries
(under the Ministry of Education) and of their
clinics/dispensaries (under the Ministry of Health).
Furthermore, the arrests of accused terrorists and their
convictions in courts has also provided symbolic messaging
to placate the United States and mute India’s incessant
harrangues. India, for its part, has had its scheme of
isolating Pakistan and putting it on the blacklist fully
neutralized, while its own economy has begun to tear at the
seams along with its polity.
● June 2020 (?)
The FATF plenary shall be held and Pakistan’s
case is to be considered. Should sufficient progress be
made on the remaining points, an entry into the whitelist
might be possible.
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