The US push to put a motion to place Pakistan on a global terrorist-financing watchlist comes at a time when Washington itself is accused by NATO ally Turkey of supporting, arming and financing a terror organisation on Syria's northern border.
The United States has put forward a motion to place Pakistan on a global terrorist-financing watchlist with an anti-money-laundering monitoring group, according to a senior Pakistani official.
Pakistan has been scrambling in recent months to avert being added to a list of countries deemed non-compliant with terrorist financing regulations by the Financial Action Task Force (FATF), a measure that officials fear could hurt its economy.
The US has been threatening to get tough with Islamabad over its alleged ties with militants, and last month President Donald Trump's administration suspended aid worth about $2 billion.
Islamabad, which denies assisting militants in Afghanistan and India, has reacted angrily to US threats of further punitive measures.
A meeting of FATF member states is due to take place next week in Paris, where the organisation could adopt the motion on Pakistan. The FATF, an intergovernmental body based in Paris, sets global standards for fighting illicit finance.
Pakistan's de facto finance minister, Miftah Ismail, told Reuters that the United States and Britain put forward the motion several weeks ago, and later persuaded France and Germany to co-sponsor it.
"We are now working with the US, UK, Germany and France for the nomination to be withdrawn," Ismail said, speaking by telephone from Europe. "We are also quite hopeful that even if the US did not withdraw the nomination that we will prevail and not be put on the watchlist."
Pakistan had been on the FATF watchlist from 2012 to 2015.
Pakistani officials and Western diplomats say that being put on the FATF watchlist could deal a blow to Pakistan's economy as it would make it harder for foreign investors and companies to do business in the South Asian nation.
"If you're put on a terror watchlist, you're made to go through all the (extra) scrutiny," Pakistan's former counterterrorism chief, Khawaja Khalid Farooq, told Reuters. "It can hurt the economy very badly."
Ismail said the FATF motion focused Pakistan-based Jamaatud Dawa (JuD) chief Hafiz Saeed, whom India accuses of masterminding the 2008 Mumbai attacks that killed 166 people. That suggested the United States had put forward the motion at India's behest, he said.
A spokesperson at the US Embassy in Islamabad said the United States was "absolutely not" acting on behalf of India.
US State Department spokeswoman Heather Nauert said "the US has consistently expressed our long-standing concern about ongoing deficiencies in Pakistan’s implementation of its anti-money laundering/counterterrorism finance regime.
"In addition to broader systemic concerns, this also includes Pakistan’s non-compliance with its commitments under UN Security Council Resolution 1267," she added.
Resolution 1267 requires all states to freeze the assets of people and organisations on a list established by the resolution, including Saeed and his "Islamic charities." Washington has designated Saeed a terrorist.
Saeed has repeatedly denied involvement in the Mumbai attacks and says the charitable organisations he founded and controls have no ties with militants.
On Monday, Pakistan announced it had amended its anti-terrorism law to ban militant groups and organisations that are listed as "terrorists" by the United Nations, a move seen to be targeting those charities.
Pakistan's attorney general, Ashtar Ausaf, told Reuters that the new laws would enable the government to track fundraising activities of all the UN-proscribed groups and take punitive action such as freezing their assets.
"Makes no sense"
Ismail has said that he believed other FATF nations would recognise Pakistan had made serious efforts to deal with militant financing.
He added that moves to put Islamabad on the FATF watchlist were counter-productive when Pakistan was already undergoing "mutual evaluation" by experts from other countries, who are measuring progress in curbing illicit fund flows.
"It's a very intrusive process and...we are happy to work with them, but while we are being given a mutual evaluation, it makes no sense for us to be now put on the watchlist," Ismail said.
Ankara accuses the US of supporting terror groups
The United States' push to place Pakistan on a global terrorist-financing watchlist comes at a time when the US itself is being accused of supporting, arming and financing a terror organisation on Syria's northern border, by NATO ally Turkey.
US admission that it is backing the formation of a 30,000 strong army consisting of YPG militants has drawn Ankara's ire with Turkish President Erdogan stating, “the US created a terror organisation with 30,000 people and has provided them with 4,800 truckloads of arms as of now. Whatever you send them, the army of 30,000 you have created, will not be able to represent you there.”
Ankara sees YPG as a terrorist organisation and an extension of the outlawed PKK which is designated as a terror organisation by the US and EU.
The PKK has waged a terror campaign against Turkey for more than 30 years, leading to the deaths of more than 40,000 security forces and civilians – including more than 1,200 since July 2015.
Erdogan ahead of a visit this week by Secretary of State Rex Tillerson on Tuesday said that a US decision to continue funding the YPG will affect Turkey's future moves.
"Our ally's decision to give financial support to the YPG ... will surely affect the decisions we will take," Erdogan said in a speech to members of his AK Party in parliament.
His comments followed the release of the US Defense Department's 2019 budget, which includes requests for funds to train and equip local forces in the campaign against Daesh militants in Syria.
The Pentagon requested $300 million for Syrian "train and equip activities" and $250 million for border security requirements, according to a copy of the budget.
"It will be better for them not to stand with the terrorists they support today. I am calling on the people of the United States - this money is coming out of the budget of the United States, it is coming out of people's pockets," Erdogan added.
Although a senior US official who follows US policy in the region has said Pakistan has "always been selective" in cracking down on militants who use its territory as a base. Ankara has made similar accusations saying Turkey would pursue national and international methods of justice towards the US for supporting terrorism.
The US listing of Pakistan on a terror list will not be lost on Ankara and could well be raised with Tillerson when he visits on Thursday.