The FATF and its mirror-body APG have begun to tighten the noose around Pakistan, and their most recently revealed report card (The Mutual Evaluation Report, MER), presents a mixed opinion about the steps Pakistan has taken since its grey-listing last year. In its own words, “competent authorities have varying levels of understanding of the country’s money-laundering and terror-financing risks, and the private sector has a mixed understanding of risks.” On one hand, it finds that important steps have been taken, and many recommendations have at least been partially fulfilled. But on the other hand, it notes that much still needs to be done, and a major impediment is that key institutions do not comprehend either the gravity of the situation or nuances around the key concepts. In other words, according to the APG, many of Pakistan’s institutions seem unfit or inept, given the magnitude of challenge. Much of the mutual evaluation report is based on rich datasets displaying how economic activity is undertaken in the country. If anything, the 228-page MER serves as a useful guide to gleaning just how complex economic life is in the country, and how daunting the task of regularizing it has become. That said, much recent exploration, including my own [1], highlights the glaring shortcomings of the FATF as a self-styled watchdog for international economies. One of the most pertinent arguments (among several others) against the FATF’s practices is just how much they have deviated from the body’s original goals at its inception in 1989. A recent example, known informally as the “Russian Laundromat,” illustrates this perfectly. To start, it should be noted that the FATF was originally conceived in anticipation of a massive outflow of wealth from the dissolution of the USSR. The former Soviet Union held all material assets with the state as a public trust, thereby abolishing private ownership of the means of production. Following the chaos of dissolution, the fear both within and beyond the former USSR’s borders was that self-styled Mafioso oligarchs would use physical violence and disarray to siphon funds formerly held in the public trust to personal accounts in offshore jurisdictions. The purpose of the FATF was largely confined to monitoring the flows of funds from that side of the fizzling Iron Curtain during a period of upheaval. It was only after 9/11 that the guns became squarely-pointed at Muslim countries, since it was ever so convenient for the powers-that-be to conflate the term “Muslim” with “terrorist” exclusively; and Muslims worldwide have been living with the consequences ever since. However, in serving the political interests of targeting specific (mostly Muslim) countries with grey and black lists instead of keeping a focus on the transfer of black money in societies in upheaval, the FATF became more of a political lapdog and less of a serious watchdog. The FATF and its mirror-bodies thus lost the plot with regards to the oligarchs who nabbed up considerable wealth in the tumult of economic transition in the former USSR republics. As a result, not only have Mafiosos managed to move considerable amounts of wealth out of Russia and her sister republics, but also that Western banks with their finely-suited and (at best) amoral “financial experts” have acted as henchmen and abettors to that process. One of the most notorious incidents is the “Russian Laundromat” scheme, which involved the mass-scale laundering of money from Russia, Moldova, and several other countries, to the tune of between $20-80 billion dollars. It is in fact still not clear just how much dirty money was moved out through the Laundromat scheme, but the numbers dwarf anything remotely possible in the smaller and largely de-dollarized economy such as Pakistan’s. What is clear, however, is that the swanky Western banks had their corrupt hands deeply sullied by deliberate involvement in this syndicate. The most prestigious bank within the most prestigious financial center on the European mainland, the Deutsche Bank for Frankfurt, Germany had its pockets 175 million Euros deep in the Laundromat scheme. This is in addition to the Danske Bank scandal in which Deutsche Bank was again implicated, which has worth more than 160 billion Euros, mostly of Russian provenance. Deutsche was not alone; Citibank, HSBC, Danske, and countless other banks from ostensibly responsible financial jurisdictions were awash with dirty money which they appear to have been more than happy to deal in over a prolonged harvest of black money. And where was the FATF in all of this? Nowhere in sight. Indeed it was not the FATF which uncovered any of these issues, since it was too busy trying to financially disembowel smaller economies such as Pakistan’s. Rather, it was civil society organizations, such as the journalists at the Organized Crime and Corruption Reporting Project (OCCRP), which exposed the magnitude of the Russian Laundomat money-laundering scheme. The FATF totally missed the mark on this incident, a fact that is disappointing given that this was its singular mission before its politicization by countries such as the US and India began. In the FATF’s parlance, a “mutual evaluation” of the FATF would be totally dismal for failing to stem rampant money-laundering and terrorist-financing from the specific jurisdictions it was designed to monitor. It is worth noting that the APG’s most recent MER of Pakistan goes as far as to say, on its very first page, that the APG and the FATF are “non-political bodies.” This is a notion they have begun to stress in recent publications, given that a more critical view of these watchdogs is now becoming not just more evident, but also necessary. The FATF and its mirror-bodies continue to go around bashing smaller economies willy-nilly, while missing out on the elephant in the room which is capitalism’s bane of tax havens stashing ill-gotten wealth from the developing world, not least from former USSR republics, much to the glee in the crooked smiles of so-called “responsible” Western jurisdictions. It is high time countries such as Pakistan “mutually evaluate” the FATF itself, and emphasize that it is in fact the FATF that needs to “do more.” This, naturally, will involve the FATF acting as more of a watchdog and less of a lapdog. The writer is the Director for Economics and National Affairs at the Centre for Aerospace and Security Studies (CASS). He can be reached at cass.thinkers@gmail.com