Pakistan must quickly do more to crack down on terrorism financing and money laundering or face punishment, the head of an international financial watchdog said.
The Paris-based Financial Action Task Force said Pakistan, which is already included on a "grey list" of countries with inadequate controls, had largely failed to keep its side of a remedial plan agreed in June 2018.
“Despite a high-level commitment from Pakistan to fix these weaknesses, Pakistan has not made enough progress,”said Xiangmin Liu, the FATF president.
“Pakistan needs to do more and it needs to do it faster,” he added.
The country was given until February 2020 to show progress in cleaning up its financial system, or the FATF would consider further action, including blacklisting, he said.
That would see Pakistan join Iran and North Korea on a list of global money laundering and terrorism financing hot spots.
Pakistan is already facing a damaging economic slump and economists fear blacklisting would further hit investment and trade.
Before Friday's meeting, the watchdog's Asia Pacific Group on Money Laundering (APG) criticised Islamabad's lack of progress since last year.
Of 40 recommendations, the report said, Pakistan fully complied with only one, largely complied with nine, partially complied with 26, and totally missed four parameters, which were mandatory if Islamabad wanted to be removed from the grey list.
The group said Islamabad should identify, assess and understand the risks associated with militant groups operating in Pakistan such as ISIS, Al Qaeda, Jamat-ud-Dawa, Lashkar-e-Taiba and Jaish-e-Mohammad, which continue to raise funds openly.
Islamabad said it seized assets from those groups and put their militants on trials, like the entire leadership of the JuD, including the alleged mastermind of the 2008 Mumbai attacks.
Pakistan accuses its arch-rival India of lobbying for a blacklisting as part of their stand-off over the disputed territory of Kashmir.
Islamabad had hoped that China, an ally, would use the influence of its FATF presidency to shield Pakistan from punishment.
Michael Kugelman, deputy director of the Asia Programme at the US-based Woodrow Wilson International Centre for Scholars, said Pakistan “was likely spared from the blacklist in part because of support from friends [such as] Turkey, Malaysia, and current FATF president China”.