What is Pakistan doing to combat terror financing? Not much

M Amir Rana

Ramazan is a time of goodwill and giving — a prosperous season for charities, social initiatives and not-for-profit organisations to raise funds. These funds are then used to bankroll operations around the year. But a chunk of the money collected in the holy month ends up, directly or indirectly, in the hands of banned extremist and terrorist outfits.

No properly investigated or researched estimate of the militant economy exists in Pakistan. Yet, there is strong evidence to suggest that the funds collected by radicals, through public donations, significantly contribute to their resources.

So, then what is the government doing to plug terror financing? For now, it is convinced that rolling out a few advertisements on state television would be enough to sensitise the masses on the issue. It is not. And our lack of seriousness could be brought up this month in Spain as the Financial Action Task Force (FATF), an international watchdog of terror financing, meets to update its assessment of high-risk and non-cooperative jurisdictions.

Pakistan could be in trouble

The challenge of terror financing has three aspects. First, Pakistan is under international compulsion to eliminate cash that makes its way into the coffers of terrorists. Second, despite Pakistan’s war on terror, banned organisations still have access to mechanisms to collect funds inside and outside the country. Third, the state has failed to introduce an effective policy to regulate charity and welfare development sectors.

As far as international commitments are concerned, the government has, in the past, taken a few measures to fulfil its obligations. But a recent Associated Press report points out that the FATF expects more. By some accounts, Pakistan’s actions against the Lashkar-e-Taiba and Jamaatud Dawa (JuD), earlier this year, were prompted by an impending report by the Asia-Pacific Group (APG) on money laundering. The report will be submitted to the FATF, and has apparently raised some objections regarding the financial traffic of JuD.

Also, last year the State Bank of Pakistan instructed all banks in the country to freeze the accounts of 2,021 individuals listed in the Fourth Schedule of the Anti-Terrorism Act, 1997. The bank has also issued new guidelines that aim to prevent the use of the banking sector for money laundering, terror financing and illegal transfer of funds. Moreover, President Mamnoon Hussain has issued an ordinance empowering the Securities and Exchange Commission of Pakistan (SECP) to take adequate measures against fraud, money laundering, and terror financing.

According to media reports, the government is also trying to introduce a law that would require a citizen to disclosure his/her money trail.

These are important steps, but not enough to choke off the flow. The real challenge lies elsewhere – terrorists moving money through informal channels. Few militants use banks to conduct their nefarious missions.

The landscape of Islamic charities in Pakistan is quite diverse, ranging from local-level welfare organisations to national — and regional — level relief groups. People find it easier to donate by hand on a first come, first serve basis.

Then there are the donations that flow in from Pakistanis living in the Middle East, which go directly to religious charities. But the money coming from expats in Western countries is earmarked either for non-religious charities or for handing out at religious shrines. Representatives of banned organisations are also known to travel to the Gulf states during this month to collect donations themselves.

Till now, the government’s focus has largely remained on Western non-governmental development organisations. It has been working around the clock to bring them under a strict monitoring framework. In the meantime, funds from Gulf countries are still flowing to religious and militant groups. The government has even failed to chalk up a list and to identify and publicise charity networks in Pakistan that are clean. The ultimate beneficiaries of this lack of vision are the terrorists.