Pakistan’s terror-finance time-bomb

Islamabad is now feeling the heat from the global Financial Action Task Force — but this isn’t the end of the Lashkar-e-Toiba story

 Days after 26/11, with the threat of an India-Pakistan war just beginning to recede from the minds of policy-makers, United States diplomat Bryan Hunt met Pakistani Punjab Chief Minister Shahbaz Sharif for a leisurely breakfast to discuss the next steps in the war against terror. Key terror commander Hafiz Muhammad Saeed had been arrested on December 12; the next morning, the portly politician told Hunt that “he intended to completely shut down the Jama’at-ud-Dawa”. The diplomat was impressed: “The unwavering attitude displayed by Shahbaz Sharif in shutting down the Jama’at-ud-Dawa bodes well for the crackdown,” he reported in a classified cable to the State Department.
Less than a year later, in October 2009, Saeed walked out of prison — efforts to keep him in jail, other diplomatic cables record, sabotaged in no small part by Sharif and his brother, now Prime Minister Nawaz Sharif. The terror commander soon became a key figure in Pakistan’s Islamist politics. He sought to create a loyal constituency among the religious right for the army, then besieged by jihadists determined to overthrow the state.
Now, Saeed is back in detention again — because no less than Khawaja Asif, Pakistan’s Defence Minister, said at a conference in Germany last month, that he could “pose a serious threat to society”. No one knows what that threat is, though, because no criminal charges have been brought. There has been no explanation, either, of why Pakistan is holding Saeed, other than that it is in national interest.
It probably isn’t a coincidence, though, that the action against Saeed came on the eve of a meeting, last month, of the Financial Action Task Force (FATF) — a multi-nation body made up of 36 members from developed countries, and eight regional bodies which mirror its work.
The FATF’s Paris plenary meeting, held from February 19-24, is believed to have given Pakistan another 90 days to act against the finances of terrorist groups like the Jama’at-ud-Dawa. Failing to do so could, potentially, lead to the country being placed on a black list that could raise the costs of interacting with the global financial system: trade, remittances, loans, bilateral and multilateral aid.
Two years ago, the country had bought time to avoid this outcome. In a February 2015 statement, the FATF said it had removed Pakistan from a list of nations which were subject to ongoing monitoring, saying the country had “established the legal and regulatory framework to meet commitments in its action plan regarding the strategic deficiencies that the FATF had identified in June 2010”.
The FATF statement, however, noted that Pakistan was obliged to continue working with its Asia-Pacific Group, “as it continues to address the full range of AML/CFT (Anti-Money Laundering/ Countering Financing of Terrorism) issues identified in its mutual evaluation report, in particular, fully implementing UNSC Resolution 1267.”
But in 2015-16, diplomatic sources say, Pakistan conspicuously failed to comply with its commitment to implement Resolution 1267, which obliges countries to freeze all financial assets that could aid listed entities.
Earlier this year, an Indian Express investigation showed that the Jama’at-ud-Dawa’s charitable arm, the Falah-i-Insaniat foundation, was raising funds for the organisation through proxy bank accounts, which it openly advertised through Facebook— with no action from Pakistani police authorities.
The issue in fact dates back to 2011, when Pakistan almost ended up in serious trouble with the FATF because of its failure to enact appropriate anti-money laundering and terror financing legislation. Though there was substantial resistance to action against the Jama’at-ud-Dawa, Pakistan’s financial establishment made clear that the opposition would come at a considerable cost.
Following protracted wrangles, Pakistan’s National Counter-Terrorism Authority (NACTA) released a list of banned organisations in December 2014. The Jama’at-ud-Dawa was listed as having been “under observation” since 2007, while the Falah-i-Insaniat Foundation was not mentioned.
Then, following a demand from former US secretary of state John Kerry, an amended list of banned organisations was released, which showed the Falah-i-Insaniat Foundation and Jama’at-ud-Dawa as having been proscribed — not placed under watch — in March, 2012, and December, 2008, respectively.
But the list disappeared, along with NACTA’s entire website. A series of contradictory statements followed, with Pakistan’s then defence minister insisting there was no reason to ban the Jama’at-ud-Dawa, while the Foreign Office insisting that it indeed had been banned. Saeed himself put the issue to rest days later, leading a rally in Karachi.
Now, NACTA’s latest list says the Lashkar-e-Toiba has been banned since 2002, but the Jama’at-ud-Dawa and Falah-i-Insaniat Foundation are listed as having been placed on a watch-list only in January this year. There is no mention of the earlier listings, nor reference to any legal proceedings that might have followed from them.
What might Pakistan hope to achieve through what is, after all, a not particularly cunning charade? The answer might well be: time. For all its effusive talk on China, Pakistan still remains critically dependent on Western economies. Pakistan’s biggest export destinations are, in descending order, the United States ($3.6 billion), China ($2.8 billion), Afghanistan ($2.2 billion), Germany ($1.7 billion) and the United Kingdom ($1.7 billion). The United States is planning to triple aid to Pakistan this financial to $900 million, but half of that will be contingent on military action against its jihadist proxies, the Haqqani Network; $300 million promised last year was not disbursed since the action never materialised.
Even though the China-Pakistan Economic Corridor promises a staggering $51 billion, much of that is to come from private corporations, and may thus never materialise; it is, moreover, long-term funding, which is no substitute for badly-needed short term aid.
Put simply, Pakistan needs to stay on the right side of the United States — and with President Donald Trump in office, may well fear that the long leash it enjoyed might finally have run out. Seeking an exit from Afghanistan, Islamabad fears, Trump might just be willing to ratchet up the pain on Pakistan to levels past administrations were unwilling to countenance for fear of losing influence with the nuclear-armed state.
This is good news for India: fear of Western sanctions will compel Pakistan to restrain its jihadist proxies and that will give New Delhi some breathing space along the Line of Control and in Kashmir. This breathing space will not, however, be infinite. The Lashkar-e-Toiba’s rebirth after 26/11 is, after all, a cautionary tale: the men who bred this dragon have shown themselves to be skilled in the art of raising its spawn from the ashes, again and again.



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