By Mubasher Bukhari and Asif Shahzad

LAHORE, Pakistan (Reuters) - Pakistani Islamist Hafiz Saeed, accused by India and the United States of masterminding 2008 attacks in Mumbai, was jailed for 11 years on Wednesday on terrorism financing charges, a Pakistani government prosecutor and his lawyer said.

The religious group leader was the first high profile figure convicted on terrorism financing charges in Pakistan, which denies regular accusations that it shelters militants.

The unprecedented ruling came ahead of a meeting of a world financial watchdog, Financial Action Task Force (FATF), next week to decide whether to blacklist Pakistan over a failure to curb terrorism financing.

Amid pressure from the FATF to take action against Saeed's militant groups, Pakistan charged him in December with collecting funds for his organizations, which are listed as terrorist organizations by the United Nations. He pleaded not guilty.

"Hafiz Saeed and another of his close aides have been sentenced in two cases of terrorism financing," prosecutor Abdul Rauf Watto told Reuters.

"The total punishment in both the cases was 11 years but he will serve five and a half years in jail as the two punishments will run concurrently," Saeed's lawyer Imran Gill said. "We will appeal against the verdict."

Saeed is the founder of Lashkar-e-Taiba (LeT), or the Army of the Pure, a group blamed by India and the United States for the four-day Mumbai siege, in which 160 people, including Americans and other foreigners, were killed.

The U.S. State Department praised the ruling in a statement on Twitter.

"(The) conviction of Hafiz Saaed and his associate is an important step forward - both toward holding LeT accountable for its crimes and for Pakistan in meeting its international commitments to combat terrorist financing," it said.

Saeed has denied any involvement and says his network, which spans 300 seminaries and schools, hospitals, a publishing house and ambulance services, has no ties to militant groups.

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It is funded by charities Jamat-ud-Dawa (JuD) and Falah-e-Insaniat Foundation (FIF).

The JuD said Pakistan had been taking what it said were illegal and unconstitutional actions lately against Saeed and the groups, under pressure from the West, and to please the FATF.





GRAY LIST

Saeed's groups disavow armed militancy inside Pakistan, but say they offer vocal and moral support for rebel fighters in Indian-administered Kashmir in the disputed Himalayan region. The two nuclear-armed nations have fought two wars over Kashmir.

Pakistan, included on a so-called gray list compiled by the FATF, has been under increasing pressure to curb the militants' financing. Blacklisting would likely result in tough financial and banking restrictions that could cripple Pakistan's already struggling economy.

The United States has offered a reward of $10 million for information leading to the conviction of Saeed, who has been arrested and released several times over the past decade.

The United States has long pressed Pakistan to try Saeed, who is designated a terrorist by the United States and the United Nations.

Saeed and his group's charities have entered mainstream politics under a plan backed by Pakistan army in a bid to integrate militants into society. They contested a 2018 general election under a new name, Milli Muslim League (MML), but did not win any seats.

Western analysts say Saeed's groups are considered part of state-backed proxies nurtured and supported by the Pakistani military to counter India in the region. The military denies that.







(Reporting by Mubasher Bukhari in Lahore and Asif Shahzad in Islamabad; Editing by Philippa Fletcher, Robert Birsel)