Pakistan could face financial sanctions from FATF, say analysts

General view with Faisal Mosque in Islamabad, July 13, 2008. (REUTERS)
Updated 19 February 2018
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Pakistan could face financial sanctions from FATF, say analysts

ISLAMABAD: Pakistan may be at risk of being placed back on the international terror-financing watch list of the Financial Action Task Force (FATF).
FATF began its six-day plenary meeting in Paris on Sunday to discuss the safety and security of the global financial system.
The resolution to place Pakistan on FATF’s list is spearheaded by the US, with the support of Britain, France and Germany. The US has reportedly had concerns about the depth of Pakistan’s commitment to tackling money laundering and terror financing.
US-Pakistan relations hit a new low last year when Washington — unveiling its new strategy for Afghanistan — accused Pakistan of harboring and supporting terrorists.
Pakistani Foreign Minister Khawaja Mohammed Asif is currently visiting Moscow on a four-day tour, at the invitation of his Russian counterpart Sergey Lavrov.
Asif will likely raise Islamabad’s concerns about the FATF in an attempt to muster Russian support against the four countries leading the attempt to include Pakistan on the watch list.
Last year, FATF’s International Coopera­tion Review Group resolved to scrutinize Pakistan’s apparent support of proscribed groups operating on its soil and requested a report on the country’s efforts to combat terror financing ahead of the its next sessions. The global intergovernmental organization meets three times a year.
“This time (the effects) would be even greater because there are other pressures on Pakistan,” political commentator and retired Lt. Gen. Talat Masood told Arab News, speculating on what might happen should Pakistan be included on the watch list again.
“Pakistan’s balance-of-payment position is very adverse at the moment and internal stability is not good. It will have a greater impact than it had last time,” he continued, urging the government to take “appropriate measures” to combat the imminent danger of sanctions.
Pakistan spent five years on FATF’s watch list from 2010, before its compliance with international standards saw it removed from the list.
Masood said that if financial restrictions are imposed on Pakistan, it would be as a result of the country’s “foreign policy and internal situation,” which he said the government needs to review and revise to avoid risking Pakistan’s economic stability and further tainting the country’s international image.
Former diplomat Javed Hafiz, however, believes “it’s an institutional, not a policy, problem.”
Hafiz told Arab News, “It’s a pressure tactic to force Pakistan to do more than it’s already doing. It’s already in our national action plan not to allow banned organizations (or individuals) to operate, even under a new name, and to freeze their assets.”
Senior economist Dr. Syed Nazre Hyder described the potential impact of Pakistan’s inclusion on the watch list — should it happen — as “near lethal.” He pointed out that the cost to banks’ customers will rise, investors in the international capital market would request a much higher rate of return from Pakistan, and multilateral financing organizations would add risk premiums on any money borrowed.
Furthermore, financial experts fear the International Monetary Fund (IMF) may reject any loan extension Pakistan might request as a bailout to curb its widening trade deficit, or offer a new deal with stricter guidelines dictated by the US and the European Union.
“Pakistan will need a loan to pay off its debt burden,” Hyder told Arab News. “If it’s included on the list, the country will face a serious challenge sourcing funds for repayment leading to the possibility of default. This would cripple Pakistan economically.”
Dr. Ashfaq Hasan Khan, a former adviser to the Ministry of Finance, believes Pakistan’s inclusion on the FATF’s list may not have the expected impact, however.
“Pakistan has done a lot as far as anti-money laundering is concerned. It’s taken additional steps last week to further strengthen (that section of law),” said Khan, referring to the government’s seize, freeze, and control operation against Jamat-ud-Dawa (JuD) and its charity wing, the Falah-e-Insaniat Foundation (FIF).
Both JuD and FIF are linked to Hafiz Saeed, whom India accuses of masterminding the November 2008 attacks in Mumbai. Saeed has a $10 million bounty on his head.
Khan believes the impact on Pakistan’s relations with the international financial market would be insignificant. The FATF, he pointed out, “deals with terror financing and money laundering, against which we have taken action.”
Khan said the present government would not allow the US “to pull Pakistan’s strings financially.”
India has also lobbied for Pakistan’s inclusion on the FATF list. But Islamabad is banking heavily on support from China, Russia, Turkey, and members of the Gulf Cooperation Council.
Masood, for one, thinks Pakistan’s need for Chinese support is worrying.
“We are relying far too heavily on China. I don’t think even China likes that,” he said, adding that Pakistan needs to focus on internal stability before it can successfully resist international pressure, and that it should use its relationship with China to gain tangible benefits, rather than “frittering it away to counter negative pressure from the US, India and others.”


Some see signs of hope on North Korea as Trump heads to UN

Updated 22 September 2018
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Some see signs of hope on North Korea as Trump heads to UN

  • In the year since Trump’s searing, debut UN speech fueled fears of nuclear conflict with North Korea
  • The two leaders have turned from threats to flattery

WASHINGTON:North Korea’s Kim Jong Un is “little rocket man” no more. President Donald Trump isn’t a “mentally deranged US dotard.”
In the year since Trump’s searing, debut UN speech fueled fears of nuclear conflict with North Korea, the two leaders have turned from threats to flattery.
And there’s fresh hope that the US president’s abrupt shift from coercion to negotiation can yield results in getting Kim to halt, if not abandon, his nuclear weapons program.
Trump will address world leaders at the United Nations on Tuesday on the back of an upbeat summit between South and North Korea, where Kim promised to dismantle a major rocket launch site and the North’s main nuclear complex at Nyongbyon if it gets some incentive from Washington.
North Korea remains a long, long way from relinquishing its nuclear arsenal, and the US has been adding to, not easing, sanctions. Yet the past 12 months have seen a remarkable change in atmosphere between the adversaries that has surprised even the former US envoy on North Korea.
“If someone had told me last year that North Korea will stop nuclear tests, will stop missile tests and that they will release the remaining American prisoners and that they would be even considering dismantling Nyongbyon, I would have taken that in a heartbeat,” said Joseph Yun, who resigned in March and has since left the US foreign service.
Since Trump and Kim held the first summit between US and North Korean leaders in Singapore in June, Trump has missed no chance to praise “Chairman Kim,” and Kim has expressed “trust and confidence” in the American president he once branded “senile.”
But progress has been slow toward the vague goal they agreed upon — denuclearization of the Korean Peninsula, which has eluded US presidents for the past quarter-century. The US wants to achieve that by January 2021, when Trump completes his first term in office.
Although Kim won’t be going to New York next week, meetings there could prove critical in deciding whether a second Trump-Kim summit will take place any time soon.
Secretary of State Mike Pompeo has invited his North Korean counterpart Ri Yong Ho for a meeting in New York, and Trump will be consulting with South Korean President Moon Jae-in, fresh from his third summit with Kim this year. It was at that meeting in Pyongyang that the North Korean leader made his tantalizing offers to close key facilities of his weapons programs that have revived prospects for US-North Korea talks.
Yun, who spoke to reporters Friday at the United States Institute for Peace in Washington, said the US goal of achieving denuclearization in just two years is unrealistic, but the offer to close Nyongbyon, where the North has plutonium, uranium and nuclear reprocessing facilities, is significant and offers a way forward.
That’s a far cry from last September. After Trump’s thunderous speech, Yun’s first thought was on the need to avoid a war. The president vowed to “totally destroy North Korea” if the US was forced to defend itself or its allies against the North’s nukes. “Rocket man is on a suicide mission for himself and his regime,” the president said.
His blunt talk triggered an extraordinary, almost surreal, exchange of insults. Kim issued a harshly worded statement from Pyongyang, dubbing the thin-skinned Trump a “mentally deranged US dotard.” A day later, the North’s top diplomat warned it could test explode a hydrogen bomb over the Pacific Ocean.
Tensions have eased hugely since then, and cracks have emerged in the international consensus on pressuring North Korea economically to get it to disarm.
The US accuses Russia of allowing illicit oil sales to North Korea. Trump has also criticized China, which has fraternal ties with the North and is embroiled in a trade war with the US, for conducting more trade with its old ally. Sanctions could even become a sore point with South Korea. Moon is eager to restart economic cooperation with North Korea to cement improved relations on the divided peninsula.
All that will increase pressure on Washington to compromise with Pyongyang — providing the incentives Kim seeks, even if the weapons capabilities he’s amassed violate international law. He’s likely eying a declaration on formally ending the Korean War as a marker of reduced US “hostility” and sanctions relief.
That could prove politically unpalatable in Washington just as it looks for Kim to follow through on the denuclearization pledge he made in Singapore.
Frank Aum, a former senior Pentagon adviser on North Korea, warned tensions could spike again if the US does not see progress by year’s end, when the US would typically need to start planning large-scale military drills with South Korea that North Korea views as war preparations. Trump decided to cancel drills this summer as a concession to Kim.
“Things can flip pretty quickly,” Aum said. “We’ve seen it going from bad to good and it could fairly quickly go back to the bad again.”