ISLAMABAD, Pakistan-Saudi Arabia has backed down under pressure from the US and allowed Pakistan to be placed on an global terror-financing watch list, officials from countries involved in the decision said Friday, dealing a blow to the country's struggling economy.
Despite initially agreeing to Pakistan's viewpoint, the FATF Plenary chose to place the country on the Grey List from June, confirmed a senior government official who attended FATF meetings in Paris, France. Pakistan was on the watch-list between 2012 and 2015 as well but only for money laundering.
The resolution against Pakistan was moved by the USA which says Islamabad is not doing enough to comply with anti-terrorist financing and anti-money laundering regulations. One of the first actions that the Trump administration took in January 2017 was to summon the Pakistani ambassador and inform him of the consequences this could lead to.
The Mutual Evaluations also provide an in-depth description and analysis of each country's system for preventing criminal abuse of the financial system.
The move is expected to inflict serious damage on Pakistan. Once the FATF approves this Action Plan in June, there will be a formal announcement from FATF about placing Pakistan on the Grey List.
On Tuesday, Foreign Minister Khawaja Asif tweeted that Pakistan had received a 3-month reprieve, adding that it was "grateful to friends who helped". France and Germany subsequently joined this nomination.
Pakistan had launched last-minute efforts to avoid being placed on the list, such as taking over charities linked to Hafiz Saeed.
However, some of these actions remained pending, and Pakistan only finished checking the off about two months ago. The decision to monitor, officials said, was by consensus and after a long set of "deliberations" and "interventions" by multiple countries that supported the move.
Pakistan, the government source said, was convinced it would have three months to satisfy all other FATF issues and was negotiating with FATF co-chairs from Italy and America about what they need to do ahead of the June session when the United States demanded to raise its motion again late on Thursday. The Pakistanis were scrambling to shore up support.
"We've seen modest progress in terms of Pakistan's actual acknowledgement of these concerns, but the President is not satisfied with progress when it comes to Pakistan", Shah said.
Speaking to Geo News, economist Mohammad Sohail said the impact Pakistan would face on being placed on the grey-list would be more on the country's image than the economy. The United States (US) and Britain had put forward a motion to place Pakistan on the FATF terrorist-financing watch list.
Mike Casey, a partner at law firm Kirkland & Ellis in London, said being put back on the grey list would heighten Pakistan's risk profile and some financial institutions would be wary of transacting with Pakistani banks and counterparties.
In the United Nations, China, as a permanent UN Security Council member, has single-handedly blocked key terror designations like that of JeM's Maulana Masood Azhar, despite Indian and U.S. requests.
FATF is an inter-governmental body established in 1989.
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