ALTHOUGH the chances of Pakistan being placed on the FATF grey list during the latest plenary meeting held in Strasbourg, France, were minimal, there was significant concern in Islamabad. The fear stemmed from India`s potential efforts to push Pakistan back onto the grey list, especially against the backdrop of heightened diplomatic competition between the two nations following the four-day stand-off, which had brought them perilously close to a full-scale war.

India had launched an extensive diplomatic offensive against Pakistan after the May 9 standoff, hoping it would succeed in isolating Pakistan globally over the issue of terrorism. However, this time, India failed to achieve its goal. There may be many reasons, but one major factor was that the Pakistan-US equation was different this time. Since President Donald Trump`s first congressional address, in which he acknowledged and praised Pakistan`s role in the fight against terrorism, including the handing over of key IS-K leaders to the US, the dynamics had shifted.

The US view influences major monetary institutions globally, as it does FATF. China was at the plenary to defend Pakistan, as it has done several times in the past, and went the extra mile to support Pakistan on the FATF platform.

One cannot ignore the role of Turkiye in countering pressure as well. During the last meeting, Saudi Arabia, several GCC member states, Portugal and South Africa expressed strong support for Pakistan.

Like other global forums, regardless of the rules, technicalities and professional standards they set, powerful nations influence decisionmaking, including within the IMF and World Bank. For instance, in 2018, the UK, Germany, France and the US lobbied to put Pakistan on the grey list for a few deficiencies in its international bankingtransactions andlack oflegislation concerning UNSC-designated terrorist entities and individuals. India seized the opportunity and joined the UK-led group against Pakistan at FATF. Pushing back, Pakistan worked to meet compliance requirements, which it successfully achieved in 2022.

Apart from the conducive environment this time, Pakistan was well-prepared to present its case and put in considerable effort. The creditgoes to all the collective efforts made by the stakeholders, but the newly established AntiMoney Laundering and Counter-Terrorism Financing (AML/CTF) Authority and FIA played a significant role in vigilance regarding FATF compliance and changing priorities.

Pakistan is not only in a safe zone until October this year, when the next FATF plenary is scheduled, but for the next four years, when mutual evaluation is due. Mutual assessment refers to a process where FATF member countries assess each other`s implementation of FATF standards on combating money laundering, terrorist financing, and financing of proliferation.

However, to sustain this status, the AML/CTF Authority would have to play a critical role in the future, as the goals and compliance requirements of FATF are evolving in response to increasingly sophisticated threats of money laundering and terrorist financing. The political influence of any significant power, including India, can be better countered if Pakistan is well-prepared to defend its case.

Pakistan`s journey with FATF reflects its growing resilience and adaptation to international standards. The narrative began in 2017 when the Asia-Pacific Group, a regional antimoney laundering/ counter-terrorist financing watchdog, issued warnings to Pakistan. Initially, these warnings were not taken seriously, which led to the UK, Germany, France and the US exerting pressure, resulting in Pakistan being placed on the FATF grey list.

The government passed over a dozen laws to meet FATF requirements, including key legislation such as the Anti-Terrorism (Amendment) Act and the UN Security Council (Amendment) Act, to address British, German and French concerns. Administrative actions, such as freezing assets linked to banned groups, also demonstrated progress. In October 2022, Pakistan completed both the 2018 and 2021 Action Plans.

However, oversight was a critical challenge, and to address it, a dedicated FATF Secretariat was established within the civilian bureaucratic structure. It was eventually led by a major general, as FATF compliance had become a national security challenge with significant political, diplomatic and strategic implications.

The FATF secretariat`s oversight involved keyagencies, including the State Bank of Pakistan, the Financial Monitoring Unit, the Federal Board of Revenue, the Securities and Exchange Commission of Pakistan, the National Counter Terrorism Authority (Nacta) and law-enforcement bodies. Special cells were established in institutions such as FBR and the National Accountability Bureau to enhance coordination, monitoring and enforcement of anti-terror financing and anti-money laundering measures.

Interestingly, many countries on the FATF grey list, including Pakistan, have taken extensive actions against NGOs and civil society under the guise of FATF compliance, suppressing critical voices. At the last plenary, FATF emphasised that its procedures were designed to prevent the misuse of measures intended to protect nonprofit organisations from abuse.

After Pakistan`s removal from the grey list, the FATF Secretariat was formally transformed into an authority through legislation passed by the PDM government in 2023. The AML/CFT Authority is responsible for overseeing the implementation of AML/CFT frameworks, promoting practical cooperation and coordination among stakeholders, initiating capacity-building efforts and monitoring progress on various Action Plans. Additionally, it engages with global counterparts and regulatory bodies, including FATF.

So far, the authority has performed well.

However, a recurring issue in Pakistan is that newly established institutions meant for policymaking and oversight often begin interfering in operational matters instead of focusing on their designated roles. While the authority is powerful and positioned to make significant contributions, it must remain focused on its oversight mandate. If it ventures into operational roles, its trajectory might resemble that of Nacta, which will become a wing of the National Intelligence Fusion and Threat Assessment Centre.

FATF compliance requirements are constantly being adapted to address the evolving challenges brought on by rapid technological advancements. To navigate these changes effectively, a vigilant and focused oversight framework is essential. • The writer is a secunty analyst.