The Pandora’s Box That FATF Needs To Open In Pakistan

It is nothing short of a travesty that the Pandora Papers Leaks did not open a Pandora’s Box in Pakistan. In a country when a more than 15 year old story of some apartments owned by Pakistan’s three times Prime Minister Nawaz Sharif, was resurrected and blown out of proportion to orchestrate his removal from office and disqualify him for life from politics, the way the Pandora Papers story just sank was really bizarre. But the reason this scandal was buried so hurriedly is not difficult to fathom. Unlike the Panama Papers which came handy to target Nawaz Sharif, this time the names being thrown up were of senior military officials and top politicians closely associated with the incumbent government of Imran Khan. To go after the names disclosed in the Pandora Leaks would be to open the Pandora’s Box of the financial shenanigans, the money laundering operations and the covering up of terror finance networks being run by the Pakistan Army using shady businessmen and dodgy politicians.

It maybe recalled that it is precisely these AML/CFT networks that prompted the Financial Action Task Force (FATF) to place Pakistan under ‘increased monitoring’ or the “Grey List” in 2018. After Pakistan was put on the grey list, it has purportedly taken a slew of measures to fulfil the “high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime and address its strategic counter-terrorist financing-related deficiencies”. But most of these measures, especially the ones that involve curbing financial networks of terror groups closely linked to or working for the Pakistani state have been largely untouched. For throwing dust into the eyes of the FATF, Pakistan even instituted cases against UN designated terrorists like Lashkar-e-Taiba (LeT) Chief Hafiz Saeed and some of his close associates.

In very hasty trials –necessitated by the FATF calendar – the lower courts even convicted Saeed and his associates for various jail terms. That the trial courts convicted these terrorists in a matter of days should have set alarm bells ringing in the FATF in Paris. In a country where it takes many years before judgements are pronounced – it has been 13 years since the 26/11 Mumbai terror attacks and not a single accused has as yet been convicted or the cases against them concluded – for judgements to come in a matter of a few days meant that these were just eyewash cases. Sure enough, when appeals were filed in the High Court, these verdicts were overturned. Mercifully, the FATF hasn’t been takenin by these sham cases and in the October 2021 FATF Plenary the financial watchdog asked Pakistan to deliver on “the one remaining CFT-related item by continuing to demonstrate that TF investigations and prosecutions target senior leaders and commanders of UN designated terrorist groups”.

The thing is that even on the 26 action items that FATF thinks Pakistan has completed, there is a huge chasm between what Pakistan claims to have achieved and the reality on the ground. Nothing proves this more than the Pandora Paper leaks. If the action items related to money laundering and tightening of the financial system had indeed been completed, then either there would have been no Pandora Papers leaks, or the state would have moved into action to question the people whose names figured in these leaks. That has not happened. The reason as said earlier, there are half a dozen top armed forces officers who’s names figure in the list and around a dozen people who are either part of the Imran Khan regime or are closely related to people who are in the Imran Khan government. There is absolutely no cogent explanation that has been offered by these people; nor any explanation demanded by the authorities on the sources of the money that was funnelled through off-shore and shell companies. Clearly, it is the same “see nothing, say nothing, do nothing” attitude that is adopted when it comes to other AML/CFT networks that are linked to the Pakistani State and ‘deep state’.

Take the case of a former Air Chief Air Marshal Abbas Khattak whose two sons figure in Pandora Papers. Khattak is alleged to have received kickbacks of Rs 180 million in the purchase of 40 refurbished Mirage fighter aircraft. But no questions have been asked of him and his sons. Another luminary who figures in Pandora Papers is the son-in-law of another former top General who served not only as Corps Commander Lahore but also as the anti-corruption Czar when he was Chairman of NAB. General Khalid Maqbool used his position to get into the LPG gas business. The Pandora Leaks reveal an email that clearly shows how the son-in-law was laundering funds in collusion with his business partners.

A third case is that of Muhammad Hasan Muzaffar, son of a former 3 star General. The father, Lt. Gen. Mohammad Afzal Muzaffar was involved in a Rs. 4 billion scandal in which he along with another General broke all rules and invested the money of the National Logistics Cell in the stock market and ended up losing half of it. When the scandal broke, the then Army Chief General Ashfaq Kiyani promised to visit military justice on the two Generals. But military justice is quite an oxymoron in Pakistan and both these generals got off with little more than a slap on their wrists. This General’s son now figures in Pandora Papers for having an offshore company in which it is suspected the ill-gotten gains were parked. But not a single question has been asked of this father-son duo.

The most glaring case is of a former deputy chief of the Pakistani spy agency – the ISI. Maj. General Nusrat Naeem never enjoyed a stellar reputation even when he was in service. He was embroiled in a number of scandals while in uniform. He is found to be the owner of an offshore company. Other Generals, like Shafaat Shah who have bought expensive flats in London in his wife’s name while he was in service has tried to brazen it out. But he never gave the money trail of the transaction. Nor was one demanded of him. Of course, if it had been Nawaz Sharif then the heavens would have fallen. But former generals –not really! One of the names in Pandora Papers is that of the notorious fraudster Shoaib Ahmad Sheikh. He is known to be an ISI front man who was running a network of fake universities handing out fake degrees for a hefty sums of money. Just before his real business was exposed, he had started a TV channel called BOL News. This channel was basically an ISI front and meant to air ISI propaganda. Among bureaucrats, two most striking names are those of the sons for a former Finance Secretary Waqar Masood Khan and a former Taxation and Revenue Czar, Federal Board of Revenue Chairman Salman Siddiq. Khan had been heading the Finance Ministry bureaucracy for more than a decade and was known as the great survivor because he served under four different administrations. Both Khan and Siddiqi were in positions that were used to extract and launder money through their kin via off-shore companies.

Then there are the politicians and crony businessmen linked to the ruling dispensation led by Imran Khan. These people are either big donors to this party and his charity, or are members of his government. People like the convict Arif Naqvi who committed fraud of an industrial scale through his Abraaj Group and Tariq Shafi who is one of the biggest donors to Imran Khan, both have offshore companies. Cabinet Ministers like Moonis Elahi whose family provides crucial support to the government in Parliament; Shaukat Tarin who is the de fact Finance Minister; Aleem Khan who is one of the biggest financiers of Imran Khan and a Minister in Punjab province; Faisal Vawda a Senator and a crony of Imran Khan; Omar Shahryar, whose brother Khusro Bakhtiyar is a Cabinet Minister, all figure in the Pandora Papers. None of them have been asked to explain the money trail.

Given the involvement of the high and mighty of the realm in circumventing, gaming and flouting the financial system without any let or hindrance from the state machinery, there is every chance that the same avenues are being exploited by terror groups and money laundering networks. It is unfortunate that the FATF has been treating Pakistan rather leniently, even certifying that Pakistan has delivered on almost all the action points. The facts, however, suggest that the delivery is just on paper. On ground, the AML/CFT networks remain virtually untouched and have been allowed to carry on business as usual. The thing is that if FATF is serious then it must insist not just on action points but also ensure that these lead to fulfilment of the ‘immediate outcomes’ (IOs).

As far as these IOs are concerned, Pakistan’s performance, as per FATF itself is dismal. The 3rd Follow Up Report of the Mutual Evaluation of Pakistan issued in July 2021 reveals that out of 10 immediate Outcomes, Pakistan has low rating in 9 IOs and a moderate rating in just 1 IO. The Pandora Papers stands testimony to the fact that even as per FATF’s own criteria, Pakistan has failed. For instance, the Immediate Outcome 9 requires investigation into funds parked off-shore. But Pakistan has not conducted any such investigation. Pakistan has displayed a very poor understanding of offshore risks of citizens which is supposed to be IO-1. The IO-2 which relates to Pakistan seeking international cooperation for money laundering and beneficial ownership of offshore companies, has clearly been missing after the Pandora Papers leaks. There are glaring loopholes that allow illegal transfer to other countries of money earned from corruption. This is a violation of the IO-4. Because of poor money laundering investigation there has been virtually no confiscation of assets located overseas. Clearly, the FATF needs to do more to force compliance on Pakistan if it is genuinely serious about AML/CFT. This will be good not just for Pakistan but also for rest of the world.