As tensions soar between India and Pakistan following the Pahalgam terror attack and Pakistan provocative aerial assault, the Indian government is preparing a strategic diplomatic move. Reports suggest that New Delhi is set to demand Pakistan’s re-entry onto the Financial Action Task Force (FATF) grey list, following its ongoing failure to address global concerns related to terrorism financing and money laundering.
India’s finance ministry is expected to present a case for Pakistan’s greylisting at various international forums, including the International Monetary Fund (IMF), where India’s executive director will also highlight the country’s inability to meet global financial standards. With Pakistan seeking loans and financial aid from the IMF, India aims to leverage these platforms to push for accountability.
Pakistan’s Troubled History with FATF
Pakistan has a long history of being placed on the FATF grey list, a designation that places countries under increased scrutiny for their inability to meet global standards for combating terrorism financing and money laundering. The following timeline outlines Pakistan’s repeated failures to address these issues:
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February 2008: Pakistan was first placed on the FATF grey list for not meeting international standards in preventing money laundering and terror financing. The country failed to act against individuals and groups involved in funding terrorism.
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February 2012: Despite some promises of reforms, Pakistan was greylisted again due to inadequate actions against terrorism financing and money laundering.
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June 2018: The FATF placed Pakistan back on the grey list due to its systemic problems in addressing terror financing. The watchdog criticized Pakistan for not taking sufficient action against terrorist groups operating on its soil.
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August 2018: Following a detailed inspection by the Asia Pacific Group (APG), a regional affiliate of the FATF, it was found that Pakistan had not implemented crucial parts of its action plan to address financial crimes and terrorism financing.
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2019–2020: Throughout 2019 and into 2020, Pakistan remained on the grey list despite multiple deadlines set by the FATF. The country faced severe international pressure to curb terror financing, but failed to meet the expectations.
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February 2020: In yet another review, Pakistan remained on the FATF grey list. The organization once again called for full implementation of Pakistan’s action plan against money laundering and terrorism financing.
The Importance of the FATF Grey List
The FATF grey list serves as an international warning and places severe economic pressure on countries by limiting their access to global financial markets. Although countries on the grey list do not face the extreme isolation of the FATF blacklist, they are subject to heightened monitoring and scrutiny, which can discourage foreign investments and aid.
For Pakistan, the risk of re-entering the grey list comes at a time when the country is already facing an economic crisis, relying on IMF bailouts and external loans. Any further isolation could have detrimental effects on its financial stability.
India’s call for Pakistan’s greylisting comes amid growing concerns over Pakistan’s continued support for terror groups and its inability to implement key reforms. New Delhi is positioning this move as a necessary diplomatic effort to isolate Pakistan, using international financial and political platforms to push for greater accountability.