Explainer: India’s backing of UN measure against terror financing is a dig at Pakistan

India backed a crucial resolution passed by the United Nations Security Council (UNSC) on Saturday, March 30; it empowers the Financial Action Task Force (FATF) to take action on terror financing—the first such standalone measure dedicated specifically to counter the financing of terrorism.

Unanimously adopting the French-drafted resolution, the UN ordered countries to “ensure that their domestic laws and regulations establish serious criminal offences” so as to prosecute those who provide economic resources or raise funds to aid terror or terrorists. 

Also read: What stands between JeM chief Masood Azhar and the ‘global terrorist’ tag? Hint: An old rival

The Indian government, meanwhile, constituted an eight-member multi-disciplinary Terror Monitoring Group (TMG) under the Ministry of Home Affairs (MHA) to tackle terror financing and other terror-related activities in Jammu & Kashmir.

In order to ensure synergised & concerted action against terror financing & other related activities in #JK, a Multi-Disciplinary Terror Monitoring Group had been constituted by the Centre on Friday.
MDTMG will have representatives from JK Police, IB, CBI, NIA, & Income Tax Dept. pic.twitter.com/X364XHJhpk

— Kashmir Pivot (@KashmirPivot) March 30, 2019

Here’s what this means

The UNSC has called on nations to introduce comprehensive laws that make it a serious crime, in order to step up the fight against terror financing.

Urging countries to establish financial intelligence units, strengthen efforts to track terror financing, and exchange information related to such probes, the council drafted the resolution under chapter 7 of the UN Charter.

This makes it enforceable via sanctions, which is a significant leg-up from previous efforts, making it internationally binding.

What has India said?

India has long since been pushing for action against countries that support terror. In its renewed offensive against Pakistan post-Pulwama, India called for the country’s blacklisting from FATF’s International Cooperation Review Group (ICRG) on February 18. Owing primarily to India’s efforts, the intergovernmental finance watchdog has currently placed Pakistan on the grey list.

Welcoming UN’s latest move, India observed that effective implementation was key.

Syed Akbaruddin, India’s Permanent Representative to the UN, called India a “willing partner” in the while making a veiled reference to Pakistan as “serial offenders” and an “apologist” for terrorists.

“Terrorists are going to be ever more creative in finding ways to violate the rulebook. Also, the unfortunate reality is that States who are apologists for terrorists will continue to provide alibis to justify their actions and inaction too, as was done by a serial offender earlier today,” Akbaruddin said at the UN, adding that nations need to collectively to do much more.

Akbaruddin later tweeted: “New milestone adopted by @UN to Counter Terrorist Financing. Unfortunately, States who are apologists for terrorists will continue to provide alibis to justify their actions & inaction too.”

He welcomed the recognition in the UN resolution of the FATF’s role in ratcheting pressure on more than 50 countries to pass new legislation on countering terror financing.

FATF and terror financing

Marshall Billingslea, president of the FATF, which combats money-laundering and terror financing, lamented that only one in five countries (and sometimes, even less) apply laws to prosecute suspected terror financiers as criminals.

In this view, the resolution could lead to halting ransom payments for kidnappings by terror groups, which have become a major source of funding. The use of crypto-assets by terrorist organisations all over the world also has witnessed an increase in recent times, because it is untraceable.

At the end of the G20 summit last year, all member nations signed a joint communique that acknowledges the importance of “necessary reform”, given the blistering pace of “digitalization” of the global economy, to a regulatory approach for cryptocurrencies for anti-money laundering and countering the financing of terrorism, in keeping with the FATF recommendations.

“States must not allow hostage-takers or terrorists to benefit from ransom payments,” Billingslea told the UNSC on Saturday. “This is crucial, in particular, as kidnapping for ransom has become the major funding source used by remnants of Daesh around the world,” he told the council, referring to the ISIS.

Indo-Pak potshots

India, which co-chairs the FATF’s Asia-Pacific Joint Group (APG), has long demanded that Pakistan meet certain established standards, especially with regard to terror financing.

After New Delhi downgraded Pakistan to the grey list last month, Pakistan drafted a formal request with Billingslea in March, to remove India from the position that gives it powers to review Islamabad’s progress.

“Given clear Indian motivation to hurt Pakistan’s economic interests, Indian presence among the evaluators and as co-chair of the Joint Group would undermine the impartiality and spirit of the peer review process, which lies at the heart of FATF’s methodology and objective assessment,” Pakistani Finance Minister Asad Umar wrote.

Islamabad must now adhere to the new limits set by the APG to regain membership to and privileges of the task force, which it says will be difficult with India’s presence and “partiality” during evaluation.

What’s happened since the grey-listing?

The FATF in February nominated Pakistan for extensive monitoring of its “serious deficiencies” in countering terror financing, under the ICRG commonly known as the . This nomination was supported by the US, the UK, France, Germany, India.

The ICRG identified four key areas of concern—to address deficiencies in the supervision of Anti-Money Laundering and Counter-Terrorism Financing regimes, cross-border illicit movement of currency by terrorist groups, progress on terror financing investigations, and prosecution and implementation of UNSC resolutions 1267 and 1373 aimed at curbing terror financing.

It urged the government to address these concerns. The APG, along with the support of various other members, further gave Islamabad a 27-point action plan last June, which it has to implement within a period spanning 15 months in order to avoid being blacklisted.

How did Pakistan land on that list?

The decision to keep Pakistan on the grey list was taken last month on the basis of the “limited progress” it had made in curbing the financing of terrorism till January 2019. Another plenary review by the APG, which took place last arrived at the same conclusion.

Expressing dissatisfaction over Pakistan’s action, the FATF concluded that the country “could not demonstrate a proper understanding of the terror financing risks posed by Daesh (ISIS), al-Qaeda, Jamaat-ud-Dawa (Jud), Falah-i-Insaniat Foundation (FIF), Lashkar-e-Taiba (LeT), Jaish-e-Mohammad (JeM), the Haqqani Network (HQN), and persons affiliated with the Taliban”.

Urging Pakistan “to swiftly complete its action plan, particularly those with timelines of May 2019”, the plenary address thus noted how the country’s government had failed to recognise it as a credible threat to world peace.

The move, however, meant an instant downgrading of the country by multilateral lenders like IMF, World Bank, ADB, and EU, and also a reduction in risk rating by Moody’s, S&P and Fitch, which stands to seriously dent Pakistan’s failing economy even further, by stifling trade, foreign investment, commerce, and banking.

Why does this matter?

In the wake of Pulwama, India’s hardline approach towards tackling Pakistan-sponsored terrorism further resulted in a series of diplomatic and economic sanctions, besides the televised military ones. The Pakistani government has since been exceedingly wary of India’s efforts to isolate the nation globally from key cooperatives and strategic alliances.

Facing a yawning current account deficit and fighting to secure its financial future, the fate of Pakistan’s economy, therefore, seems inextricably linked to how well it tackles the problem of militancy on its territory.

Meanwhile, India with support from all the permanent members of the has been successfully pushing for more power to the FATF.

At the 13th G20 summit last December, Prime Minister Narendra Modi presented a nine-pronged agenda to deal with fugitive economic offenders and terror financing; in agenda, he called upon the FATF to also formulate a standard definition for the “identification, extradition and judicial proceedings for dealing with fugitive economic offenders to provide guidance and assistance to G20 countries, subject to their domestic law”.

Prarthana Mitra is a Staff Writer at Qrius