Re-Thinking FATF and its Widening Mandate

The 21st-century interstate conflict has taken a shift from conventional kinetic warfare towards other means, one being the use of legal warfare, to achieve similar strategic state interests. The international legal establishment influenced by global powers has taken the authority to evaluate and hold accountable state jurisdictions, making them run for their international validation. FATF is one such platform, with its continuous evolvement and renewal of agendas, which has been leveraged by certain global powers to downplay the individual economic growth of their adversaries. While observing its recent developments, it can be said that FATF operates in line with the principles of ‘experimentalist governance’.1 The systemic move from self-questionnaires, to mutual evaluations, to shifting focus on passing laws, to implementing laws, and, now in the latest June 2021 increased monitoring review it has aimed at ensuring the effectiveness of those laws. This gradual transformation is more than just a simple evolvement of the procedure but in fact a ‘fundamental rewriting’2 of the standards that FATF requires for compliance. The institution describes itself as an inter-governmental body, with the initial ‘purpose’ of collective development and implementation of the FATF mandate. However, the official meetings have a noticeable tendency to become more of a platform that allows interaction between those who are implementing the assigned mandate and those who are circulating and monitoring the FATF’s standards. In its aims of becoming an effective regulatory body, FATF has continued to expand its mandate, starting from countering money laundering to combating terrorism financing to its most recent expansion into countering ethically or radically motivated terrorism financing (EoRMFT).3

Standard schools of thought in International Relations understand monitoring largely as a tool of enforcement.4 Pakistan being one of the many countries of the global south stuck in this loop, despite its rigorous efforts is unable to impress the ‘international monitoring’. Gray-listing Pakistan for the second time (the status of which continues to date), has resulted in a staggering loss of over $38 Billion,5 has had little to no effect on the international legal establishment. Without the change of status, the words of appraisal6 and reassurance on Pakistan’s efforts and commitment remain ineffectual. Elaborating on the notion of experimentalist governance, de Búrca7 highlights the fact that experimentalist governance is not a power-free governance system. Reinforcing the idea that this form of governance (in the quasi-hierarchical economic structure), allows the misuse of the system by the powerful. Time and time again it has been discussed that through FATF Pakistan has been subjugated through economic lawfare.8 The central norms of FATF are the FATF 40 Recommendations, the overall precision of the Recommendations varies; in general, they are broad and open-ended.9 Each country is given the autonomy to develop its regulations according to its jurisdiction, which may vary from another. Evoking the soft law, creating expectations of political costs for non-compliance and legitimating third-party influence.10 This ultimately by default allows certain global powers and their allies to interfere and influence the FATF monitoring. FATF therefore can rely only on peer pressure to embarrass governments and place sanctions.

Likewise, when the implementations and evaluations are taken into account the mandate is reviewed and revised to enhance the effectiveness of the goals needed to be achieved. Resulting in a powerful tool of global financial regulation, that confirms states’ continued dominance in a globalizing economy. The most recent example of the FATF’s widening mandate is the introduction of Ethically or Radically Motivated Terrorism Financing (EoRMFT).11 The June 2021 report, released by FATF on EoRMFT ‘does not seek to define or re-define ethnically or racially motivated terrorism’.12 This presumably gives states the autonomy to develop their own understanding of EoRMFT. Multiple fractures come into play. Firstly, ‘terrorism’ is not legally defined in all jurisdictions. The report identifies this gap stating that as one state may identify an Extreme Right Wing (ERW) as a terrorist entity another jurisdiction may not. However, given the fact that the US has put itself at the centre of this global financial regulating authority and has adopted what some may call a Gramscian strategy.13 This subsequently, in a way promotes other jurisdictions to begin to accept US’ preferences as their own. The hegemonic influence was closely visible in the report when the word ‘Jihadist’ and ‘Jihadi’ was cited in close proximity to ‘right-wing extremism’. Now if the words, ‘Jihadist’ or ‘Jihadi’ have become a universally accepted word for ‘terrorist’ it rightly fits in the given report. However, given that the contemporary connotation of the word is negative and is strictly used for extreme radical Islam, the report has indirectly defined ‘ethnically or racially motivated terrorism’.

From here on, one can presume that Islamic States, such as Pakistan, will be placed under further scrutiny of the FATF and its additional mandate. The primary influencing body, i.e. the US is the regulatory hegemon, has not only continued to restrict Pakistan in the grey list but also drafted out efforts to further continue doing so. The ‘freedom’ of allowing states to develop their own regulations for the implementation of the FATF mandate goes to vain when the definition of ERW is not the same as that of the monitoring body. This huge gap allows state adversaries to use legal discourse and international influence to impact the regulating body. Ultimately, the US and its allies while imposing a standard are unwilling to pay the enforcement costs. As previously observed, FinCEN14 files determine and have demonstrated the involvement of Indian Banks in money laundering transactions leading up $1 billion. Similarly, in a most recent example, India has observed a spike in Hindu radicalism and ethnically motivated movements. Do the public speeches of RSS leaders killing Muslims15 count as RWE? Do the ‘saffron16’ clad groups harassing Muslim women in public places such as schools count as Ethnically or Racially Motivated Terrorism? Noting that the ‘saffron-clad’ groups have marked off one out of four points Art 1 of the Hague Regulations17, i.e. ‘to have a fixed distinctive emblem recognizable at a distance’. Perhaps even two points, i.e. ‘to be commanded by a person responsible for his subordinates’ – in light of the Modi Hinduvata regime. Noam Chomsky also recently highlighted the growing dangers of Islamophobia in the West and particularly in India during a webinar organized by Indian American Muslim Council (IAMC).18

The significant power asymmetries in the international financial system, and the quasi-hegemonic structure of FATF has forced states to surrender a part of their sovereignty. FATF represents itself as a technical and objective forum for assessing compliance and is rather a political forum at the end of the day.

About the Author

Verda Ahmed

The author is a Junior Research Fellow at Roads Initiative.