Pakistan has been in the crosshairs of the Financial Action Task Force (FATF), which put the country on its ‘grey list’ and now threatens it with outright blacklisting. The decision to proceed with blacklisting will depend on whether Pakistan is ‘doing enough’ to restructure its financial architecture to the FATF’s satisfaction. As such, it is crucial that the FATF’s assessment be nonpartisan, dispassionate, and nonpolitical. At the same time, those who are chairing the FATF must be able to demonstrate that they shall neither abuse the FATF’s mandate for their narrow interests, nor weaponize it against any member country.
In that context, it has been a cause of alarm in Pakistan, and a disgrace for the FATF, that India has vied for co-chairmanship of the Asia-Pacific Group (APG), which is the regional mirror body of the FATF. The underlying concern is that India’s subversion of the FATF will compromise the integrity and impartiality of the body by distorting its assessments. This would effectively turn the APG and FATF it into instruments of economic violence in Pakistan, since blacklisting could have worrisome effects on Pakistan’s banking system, on its flow of remittances, on its philanthropic organizations, on the flow of foreign investment, and on the country’s negotiations with international organizations such as the IMF.
There are two important arguments that must be advanced in rejecting India’s legitimacy as co-chair of the APG. The first argument is about the massive conflict of interest that it would create in international financial oversight if the venal Indian fox watches the henhouse; while the second argument regards India’s own horrific record of black money. India is by any measure one of the worst possible candidates for the job, both in terms of the scale of India’s black money problem, as well as the failures of the solutions it has tried (especially demonetization).
On the first point, it is not lost on Pakistani observers that putting India as co-chairman of the APG would create a massive conflict of interest in the task force, given the animosity that the Indian government has fomented through a litany of aggression. At a time when India is instigating a standoff with Pakistan, is the world really to think that India should co-chair financial oversight of Pakistan? India’s chairmanship should be seen in light of a hybrid war, in usurping control of a financial standard-setter towards a mercenary agenda.
A recent occurrence with the Standing Committee on the Interior (SSC-I) puts the already dubious partisanship of the FATF in perspective. On March 12th 2019, the SSC-I panel slammed the FATF for discriminating against Pakistan and according preferential treatment to India by ignoring substantial evidence about New Delhi’s involvement in terror financing. The SSC-I, chaired by Senator Rehman Malik, regretted that India “continued enjoying an undeclared immunity as no action was being taken against it despite all evidence of terror financing.”
Senator Malik explained that he had written a letter to FATF President Marshall Billingslea on Feb 14th, seeking action against Indian Prime Minister Narendra Modi for protecting international fugitives involved in the biggest-ever credit fraud and money laundering. He said that he had sent the letter with all the evidence proving that Prime Minister Modi was involved in money laundering and terror financing as he was supporting the RSS (Rashtriya Swayamsevak Sangh) — “the biggest terrorist organization.”
However, the weak response of Mr. Billingslea was that the FATF “was not an investigative or prosecutorial body,” a point which Senator Malik contested, since if the FATF could not open a case against PM Modi for terror financing and money laundering, “then how was taking up a case against Pakistan and putting it on the ‘grey list’”?
Senator Malik disclosed that he had written another letter to the FATF president, explaining how it was legal to take stern action against PM Modi. In his letter to the FATF president, Senator Malik reminded him that a formal inquiry against Pakistan was initiated based on a complaint from the United States alleging Pakistan’s involvement in terror funding and money laundering, and consequently the FATF placed Pakistan on the ‘grey list’. “Therefore, the stance taken by the FATF vis-à-vis my complaint against Indian Prime Minister Narendra Modi was not based on facts and practice of the FATF,” the Senator appropriately noted. The Pakistani public must recognize the double-standards in the FATF’s ploy.
On the second line of argument, the fact that India should be using the FATF is incredible given its own horrific record of dark money and shadowy transactions. According to the India Association of Chartered Certified Accountants (ACCA), India’s shadow economy amounts to 17.22% of GDP, which would equate to $516 billion dollars. In other words, India’s shadow economy alone is larger than the entire economy of the UAE, Malaysia, or Denmark. Are we really to think that such a country is capable of overseeing black money elsewhere?
Given that India has massive black money problem, we might consider the solutions they have tried to implement. In that regard, the BJP government’s shoddy and sweeping attempts to supposedly counter the black economy have included a demonetization campaign, which a consensus of economists and the Reserve Bank of India alike have deemed an abject failure, not just in hurting economic growth and decimating more than 1.5 million jobs, but also in growing the number of illicit transactions (particularly counterfeit currency to replace the demonetization) by an alarming 480%. With so much dark money slushing around, including for illicit activities and terrorist initiatives, the idea of India being a co-chair is absurd.
Both of these lines of argument, of hijacking the APG for political interests, or of failing to curb their own black economy, are necessary to understand the dilemma that Pakistan’s financial architecture faces. Pakistan must do its utmost to prevent Indian subversion of the APG and the FATF, because given the consequences that blacklisting entails, it may be very unpleasant to sit with the venal Indian fox guarding our financial henhouse.
The writer is the Director for Economics and National Affairs at the Centre for Aerospace and Security Studies (CASS). He can be reached at firstname.lastname@example.org
 Indian Express (2017). “Indian ‘shadow economy’ to shrink to 13.6 per cent of GDP by 2025: ACCA” https://indianexpress.com/article/business/economy/indian-shadow-economy-to-shrink-to-13-6-per-cent-of-gdp-by-2025-acca-4731993/
 The Economic Times (2018). “Demonetisation led to highest fake currency, suspicious transactions: Report”