New Delhi: The global body leading the fight against terror financing on Friday failed Pakistan on most “action items" prescribed for it and left it with a stark warning that a formal blacklisting is highly probable within months if it fails to move now.

The Paris-based Financial Action Task Force (FATF) failed Pakistan on 22 out of its 27 parameters, cautioning that blacklisting could follow in February 2020 if Islamabad fails to curb the flow of funds to terrorist groups.

“The FATF again expresses serious concerns with the overall lack of progress by Pakistan to address its TF (terrorist financing) risks, including remaining deficiencies in demonstrating a sufficient understanding of Pakistan’s transnational TF risks, and more broadly, Pakistan’s failure to complete its action plan in line with the agreed timelines and in light of the TF risks emanating from the jurisdiction," the 36-member grouping said in a statement.

“To date, Pakistan has only largely addressed five of 27 action items, with varying levels of progress made on the rest of the action plan. 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 which could include calling on its members and urging all jurisdictions to advise their financial institutions to give special attention to business relations and transactions with Pakistan," it added.

The FATF is currently headed by China’s Xiangmin Liu, who warned that “if by February 2020, Pakistan doesn’t make significant progress, it will be put in the ‘Black List," an ANI report said. China is seen as Pakistan’s all-weather friend and has previously bailed Islamabad out when pressure has mounted on it at various international forums.

Blacklisting would put Pakistan in the company of Iran and North Korea. Though the move doesn’t amount to international sanctions, countries will be wary of investing in Pakistan knowing that it is not a jurisdiction seen as compliant with FATF rules.

The FATF’s statement implies that companies planning to invest in Pakistan will now find it difficult to raise money or will have to pay higher rates of interest while borrowing to invest, said Dilip Sinha, a former foreign ministry official.

An Indian official familiar with the matter said FATF’s 13-18 October meeting “decided by consensus that FATF would retain Pakistan on the grey list and warn Pakistan that if it did not complete its full action plan and show significant and sustainable progress, action will be taken".

“This shows unanimity of views within the grouping on Pakistan and its role in financing terrorists," the official added, requesting anonymity.

Because Pakistan has been on the grey list since June 2018, there are no immediate implications for the $6 billion loan negotiated with the International Monetary Fund that is to be disbursed over the next three years.

The country is facing a number of economic challenges with its economy expected to grow at 3.3 % in 2019 and 2.6% in 2020, according to IMF. Inflation was set to touch 7.3% in 2019, up from 3.9% in 2018, and rise to 13% in 2020. Fiscal deficit was projected at 7.1% of GDP in 2020, the highest in the last seven years.

FATF head Xiangmin Liu (Photo: Reuters)
FATF head Xiangmin Liu (Photo: Reuters)

The fact that Pakistan has escaped the blacklist this time shows that it had garnered the support of at least three countries, thought to be China, Malaysia and Turkey. Turkish president Recep Tayyip Erdogan is due to visit Islamabad next week, according to media reports from Pakistan. Analysts were also of the view that Pakistan, which is facilitating talks between the US and the Taliban group in Afghanistan, may have got a reprieve from Washington as well.

“This clearly means that Pakistan has succeeded in getting a new lease of life from the FATF and the US has gone along with it for its own reasons," Sinha said.

Earlier, there were news reports that Pakistan could be downgraded to “dark grey", indicating that the grouping was dissatisfied with Pakistan’s performance. According to FATF rules, the “dark grey" list is an essential stage between “gray" and “black" listing. It implies a strong warning so that the country concerned gets one last chance to improve, according to officials.

The FATF is an inter-governmental body established in 1989 to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terror financing and other related threats to the integrity of the international financial system. It is a “policy-making body", which works to generate political will to bring about national legislative and regulatory reforms in these areas.

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