Global watchdog to put Pakistan back on terrorist financing watchlist

ISLAMABAD (Reuters) - A global money-laundering watchdog has decided to place Pakistan back on its terrorist financing watchlist, a government official and a diplomat said on Friday, in a likely blow to Pakistan’s economy and its strained relations with the United States.

The move is part of a broader U.S. strategy to pressure Pakistan to cut alleged links to Islamist militants unleashing chaos in neighbouring Afghanistan and backing attacks in India.

The Pakistani government official said the South Asian nation would be officially placed on the Financial Action Task Force (FATF) watchlist in June at its next meeting, which is why the FATF statement on Friday did not mention Pakistan.

The change comes days after reports that Pakistan had been given a three-month reprieve before being placed on the list, which analysts say could hamper banking and hurt foreign investment.

The United States spent the past week lobbying member countries of the Financial Action Task Force (FATF) to place Pakistan on a so-called grey list of nations that are not doing enough to combat terrorism financing.

In Washington, acting Assistant Secretary of State Alice Wells was unable to confirm the FATF decision. She said, however, that the U.S. effort to have Pakistan put on the list was partly due to Islamabad’s failure to act against Hafiz Saeed, an Islamist who heads Jamaat-ud-Dawa (JuD), a charity accused by Washington of being a front for militant group Lashkar-e-Taiba.

 “When we saw terrorists like Hafiz Saeed be released for the sixth time from house arrest or saw charitable arms of Lashkar-i-Taiba or Jaish-i-Mohammad operate freely, sometimes in front of police stations doing fund-raising exercises, it obviously raises serious concerns,” Wells said in an interview.

Lashkar-i-Taiba has been accused by the United States and India of being behind 2008 militant attacks on the Indian city of Mumbai in which 166 people died.