PESHAWAR (Pajhwok Afghan News) — In a major diplomatic setback, Pakistan has formally been placed on the grey list of the Paris-based Financial Action Task Force (FATF). The financial watchdog made the announcement late on Wednesday night, blaming Pakistan for its inability to control terror financing on its soil.

In build-up to the meeting in Paris, Islamabad had repeatedly hoped diplomatic efforts would help avert the action based on a proposal from the US and allies. Hours before of the FATF plenary session, caretaker Finance Minister Dr Shamshad Akhtar asked the watchdog to remove Pakistan from the grey list. Pakistani delegates informed the task force of the measures Islamabad had taken to crack down on money-laundering and terror-financing. However, the watchdog was not convinced.

In late February, Turkey and Saudi Arabia opposed the US-led move to place Pakistan on the watch list. However, the US pushed for an unprecedented second discussion on Pakistan held on February 22.

Although Saudi Arabia later withdrew support to Pakistan, China and Turkey still stood by the ally, which needed three votes to scuttle the move.

The US tabled the motion, seeking to place Pakistan on the watch list of countries considered non-compliant with global anti-terror financing measures. The US alleges Pakistan has not taken any action against Hafiz Saeed, the alleged mastermind of the 2008 Mumbai attacks.

The watchdog’s decision is seen as blow to Pakistan’s economy and its relations with the United States.

US intelligence officials claim that Pakistan’s ISI sponsored the 2008 Indian embassy bombing in Kabul. They say that the ISI officers who aided the attack were not renegades, indicating that their actions might have been authorised by superiors. The attack was carried out by Jalaluddin Haqqani, who runs a network that Western intelligence services say is responsible for a campaign of violence throughout Afghanistan, including the Indian Embassy bombing and the 2008 Kabul Serena Hotel attack.

Afghanistan–Pakistan relations have become more strained after the Afghan government began openly accusing Pakistan of using its ISI spy network in aiding the Taliban and other militants. Pakistan usually denies these allegations but has said in the past that it does not have full control of the actions of the ISI.

After the May 2011 death of Osama bin Laden in Pakistan, many prominent Afghan figures began being assassinated, including Mohammed Daud Daud, Ahmad Wali Karzai, Jan Mohammad Khan, Ghulam Haider Hamidi, Burhanuddin Rabbani and others. Also in the same year, the Afghanistan–Pakistan skirmishes intensified and many large scale attacks by the Pakistani-based Haqqani network took place across Afghanistan. This led to the United States warning Pakistan of a possible military action against the Haqqanis in the Federally Administered Tribal Areas. The U.S. blamed Pakistan’s government, mainly Pakistani Army and its ISI spy network as the masterminds behind all of this.