By Asif Shahzad
ISLAMABAD (Reuters) - Backed by longtime ally China, Pakistan is confident it will avert blacklisting over terrorism financing by a global watchdog on Friday but it will not be completely off the hook until it proves it is genuinely severing ties with Islamist militants, officials and analysts said.
The Financial Action Task Force (FATF) last year placed Pakistan on a gray list of countries with inadequate controls over terrorism financing. The group, holding a five-day meeting, will decide on Friday whether to retain that, or blacklist it alongside Iran and North Korea.
If blacklisted, Islamabad faces financial consequences and economic setbacks at a time when its economy is facing a balance of payment crisis.
"The main challenge for Pakistan is to convince the FATF that it is taking complete and irreversible steps against terrorist financing," Michael Kugelman, deputy director Asia Program at the Wilson Center thinktank, told Reuters by email.
Pakistan, which blames arch-rival India for lobbying to blacklist it, is relying for support on friendly countries like China, Turkey and Malaysia.
Three votes are mandatory for any country to escape the blacklisting. Two top government officials and a security personnel told Reuters that in a recent visit to Beijing, Pakistan's civil and military leadership secured a guarantee from Chinese leaders that Islamabad would not be placed on blacklist. China is presiding over the ongoing FATF plenary in France.
"God willing, we're trying that we get out of this gray-list as soon as possible, and I think you should believe that a comprehensive effort is being put in place," Finance chief Abdul Hafeez Shaikh told a news conference over the weekend.
If Pakistan does avert blacklisting it will be just a temporary relief until the FATF meets again in February, 2020.
CRITICAL REPORT
Ahead of the current plenary, the watchdog's Asia Pacific Group on Money Laundering (APG) issued a critical report on progress made by Islamabad since last year.
Of the 40 recommendations, the report said, Pakistan fully complied with only one, largely complied with nine, partially complied with 26, and totally missed four parameters, which were mandatory if Islamabad wanted to be removed from the gray list.
It said Pakistan should adequately identify, assess and understand risks associated with militant groups operating in Pakistan such as Islamic State group, al-Qaeda, Jamat-ud-Dawa (JuD), Lashkar-e-Taiba and Jaish-e-Mohammad (JeM), which continue to raise funds openly.
Islamabad says it has seized the groups' assets, and put the militants on trials, like the entire leadership of the JuD, including its chief Hafiz Saeed, the alleged mastermind of the Mumbai attacks in 2008, which killed 166 people.
"My sense is that Pakistan has taken very real steps against terrorist financing, but so long as the state retains ties to militant groups, concerns will remain within FATF about Islamabad's genuine commitment to act conclusively," the Wilson Center's Kugelman said.
Pakistani author and analyst Ayesha Siddiqa said Pakistan was unlikely to completely abandon militant proxies any time soon.
"I would start believing when JeM infrastructure gets downsized, its leader Masud Azhar is publicly arrested and put on trial," she told Reuters. "With Afghanistan still brewing, I don't think we are close to cleaning our house."