Pakistan Escapes the FATF Grey List, but Risks a Clash with its Jihadists

Forward strides: Pakistan’s Prime Minister Shehbaz Sharif addresses the National Assembly in Islamabad. Image: Abaca Press / Alamy

The South Asian country has been able to secure its removal from the FATF’s grey list, but its actions have fuelled dissent among jihadist groups in Kashmir.

On 21 October, Pakistan managed to achieve a major aim: its removal from the FATF (Financial Action Task Force) grey list of countries supporting terrorist organisations, where it had been since 2018. How did it manage this? It probably helped that Pakistan cooperated with the US in deploying its drones over Afghanistan, either by allowing the US to use Pakistani airfields (which both countries deny) or at the very least by allowing the drones overflight rights. Neither the US nor the Pakistani government will admit to this, but there are not many alternative options. This would demonstrate some commitment to combating Al-Qa’ida, and it enabled the 31 July strike that killed the organisation’s leader, Ayman al-Zawahiri. This type of cooperation would earn Pakistan at least a fair amount of goodwill from the FATF, where the US is highly influential.

However, the FATF is not about states’ active counterterrorism efforts, but about funding for terrorist activities at home and abroad. In order to be declared a ‘clean’ country, the new Pakistani government of Shehbaz Sharif took some measures against the two main jihadist organisations which it stood accused of supporting, Lashkar-e Taiba and Jaish-e Mohammad, both of which are primarily known for their terrorist and insurgent activities in Kashmir and India:

  • It sentenced the head of Lashkar-e Taiba, Hafeez Saeed – who was already detained – to another 31 years in prison.
  • It signalled its intention to actively pursue the head of Jaish-e Mohammad and to enforce the arrest warrant against him;
  • It completely cut funding to Lashkar-e Taiba in April 2022, as confirmed by multiple sources within the organisation.
  • It reduced funding to Jaish-e Mohammad – this too was confirmed by internal sources.
  • It ordered both Lashkar-e Taiba and Jaish-e Mohammad, which are still important actors in Kashmir – even if not the only ones – to avoid major attacks against Indian forces there. This was confirmed by sources within both organisations.

It is worth noting that despite the decline in funding, Jaish-e Mohammad remains a recipient of support from Pakistan’s intelligence agencies, according to two members of the organisation contacted in October. Funding had been completely suspended for about two years after the Pulwama attack in February 2019, but was resumed in 2021. Moreover, Lashkar-e Taiba’s fundraising through its vast networks of charities was never impeded, nor were the recruitment efforts of both organisations, as confirmed by three members of Lashkar-e Taiba also contacted in October. Hafeez Saeed is still able to meet his men in prison and to communicate with any member of Lashkar-e Taiba. Small-scale infiltration of Kashmir continues, likely to replace losses – Lashkar-e Taiba is reportedly sending in about 10 highly trained members per month. That said, from the FATF’s point of view, Pakistan was certainly making significant progress.

Some jihadists hope a return of former Prime Minister Imran Khan to power would result in them regaining influence within the state apparatus

Many may question how long-term the changes made by the Pakistani government are, not least because it does not appear to be in a solid position and is widely believed to be doomed to lose the next elections in August 2023. Sources within Lashkar-e Taiba and Jaish-e Mohammad do not hide the fact that they hope a return of former Prime Minister Imran Khan to power would result in them regaining influence within the state apparatus and returning to their former glory. Party politics aside, many also doubt the long-term commitment of the Pakistani army to downgraded levels of tolerance for jihadist groups fighting India. The sources in Jaish-e Mohammad mentioned above draw some comfort from the fact that not only is their funding not completely suspended, but also efforts to chase their leader, Masood Azhar, are seemingly only perfunctory. They note that he was advised to spend as much time as possible in Afghanistan – where Jaish-e Mohammad still has some hundreds of members assisting the Taliban – before being issued with an arrest warrant in 2021. Azhar has also been able to visit Pakistan repeatedly – including recently – without being detained. The sources maintain that the army is fully aware of his whereabouts and has asked him to move as many of his organisation’s active members and bases to Afghanistan as possible, in order to reduce its visibility inside Pakistan.

Any doubts regarding the long-term plans of the Pakistani army might well be legitimate, although it is impossible to really know what is in the minds of the army leadership. The entire exercise of side-lining the old proxies of the Pakistani army for their covert war against India does not, however, appear to be pure cosmetics from the point of view of members of Lashkar-e Taiba and Jaish-e Mohammad. They are increasingly nervous about what else the army might have in store for them while it seeks to continue improving relations with the US government.

Even the members of Jaish-e Mohammad, while feeling lucky to be in a better position than Lashkar-e Taiba, wonder whether they might end up the same way if the army decides further sacrifices must be made in the name of improving relations with Washington. Members of Lashkar-e Taiba, meanwhile, are definitely in a worse place. Morale is low and relations with the Pakistani authorities are poor, as a military trainer of the group commented in a private interview in October:

'How can we keep a good relationship with the Pakistani government when it jailed our deputy, Zakir Rahman Lakhvi, and recently arrested another leader of Lashkar-e Taiba, Sajid Mir, and others and others? […] The current government of Pakistan is under the control of Americans and Westerners and unfortunately, to make these countries happy and receive money from them, it forgot that Pakistan is an Islamic state and that the Indian government colonised part of our country in Kashmir…'

This source even alleged that for some time now, Lashkar-e Taiba has cut off relations with the Pakistani army and the government and ‘operates independently in Kashmir and elsewhere’. This could, in fact, be something agreed by Hafeez Saeed with the army, as having no links to Lashkar-e Taiba suits the army well at the moment. However, Lashkar-e Taiba sources allege that Hafeez Saeed himself is upset by the situation, not least because he had expected to be released not long after his detention.

Jihadist groups are increasingly nervous about what the army might have in store for them while it seeks to continue improving relations with the US government

During the previous crackdown on jihadist groups, which followed the Pulwama attack and targeted Jaish-e Mohammad primarily, there was a modest wave of defections to Islamic State, estimated by a source in Jaish-e Mohammed at 50–70 members. Could something similar, but on a bigger scale, happen now? A member of Lashkar-e Taiba warned in October that:

'…the Pakistani government and its army are touching explosive switches and these switches will destroy Pakistan if the government doesn’t change its policy against the jihadist movement. […] Daesh became an alternative organisation for the Pakistani jihadists; especially the Salafi and Ahl Hadith followers are increasingly interested in Daesh and its activities…'

Islamic State sources have indeed claimed repeatedly in recent months that members of both Lashkar-e Taiba and Jaish-e Mohammad are joining them. When details were sought, it emerged that as of September, just two Lashkar-e Taiba commanders had switched sides with their men – so a few dozen men in total – as well as some individual members of Jaish-e Mohammad. In other words, it is not a big wave yet, but one which could easily exceed the 2018–19 recruitment spree in the coming months. Perhaps members of jihadist groups want to see how the political situation evolves in Pakistan, considering that the elections are just 10 months away, and also to see whether Islamic State is able to raise sufficient funding to expand and assume the role of patron that once belonged to Pakistan’s intelligence.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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Dr Antonio Giustozzi

Senior Research Fellow

Terrorism and Conflict

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