FATF's Stern Warning To Pakistan: 'Grey List Exit Not Bulletproof Against Terror Financing'

Last Updated:October 24, 2025, 23:46 IST

The FATF said Pakistan was under a "follow-up" process since it was delisted from the grey list in October 2022, emphasising that it was not bulletproof against terror financing.

The FATF said Pakistan was under a "follow-up" process after its exit from the grey list in 2022. (AP)

The Financial Action Task Force (FATF) sounded a note of caution to Pakistan over alleged terrorist activities, saying that its delisting from the grey list in October 2022 was not a bulletproof shield for acts of terror financing and money laundering.

The warning came after the Jaish-e-Mohammad (JeM) reportedly launched a female-focused initiative under the leadership of close relatives of its top commanders, and using digital wallets to raise funds for new training camps. Officials say this tactic serves to mask financial flows on platforms that present themselves as religious education or community webinars, potentially sidestepping scrutiny by international watchdogs like the FATF.

At the conclusion of the September-October plenary today, a concern was raised before the FATF over the use of digital wallets and digital finance networking to facilitate terrorist networks.  FATF President Elisa de Anda Madrazo said they had intel reports of the use of digital wallets for terror financing and facilitation.

She said Pakistan is under a “follow-up" process since its delisting from the grey list in 2022. “Pakistan was removed from our grey list in October 2022, and as any country that is removed from the list, we continue a process of follow-up and in this case, because Pakistan is not a member of the FATF but a member of the Asia-Pacific Group (APG), that follow-up is being carried out by APG," she said during a press conference.

“Any country that is in the grey list but also exits the grey list is not bulletproof for actions of criminals, either money launderers or terrorists. We do invite all jurisdictions, including those that have been delisted, to continue their good work to prevent and deter crimes."

In connection with terrorist attacks, Madrazo said that the FATF “remains committed to strengthening our standards and their implementation to ensure less terrorist financing globally."

Pakistan Under Scanner Over Digital Wallets

Fresh reports of terror funding via digital wallets have put Islamabad back under FATF scrutiny. The FATF follow-up process involves real-time monitoring of digital financial systems, with Pakistan flagged for weak KYC (Know Your Customer) enforcement.

It has come to light that Pakistan-based terror networks are using e-wallets and crypto platforms to move funds between handlers in Karachi, Quetta and Peshawar to cells in Afghanistan and the Gulf, according to top intelligence sources. After FATF’s crackdown on hawala networks, terror financiers have moved to prepaid wallets, online transfers and mobile banking apps linked to fake identities and front NGOs.

Furthermore, small charity wallets on apps like JazzCash, Easypaisa, and Sadapay are being used to collect micro-donations that are later pooled for terror logistics. Digital forensics by Western agencies have traced transactions to accounts operated by ISI-linked operatives disguised as fintech entrepreneurs, and funds traced from the Middle East donors are found to have moved through Dubai-based wallets and crypto exchanges before entering Pakistan’s fintech ecosystem.

Pakistan’s domestic digital payment firms are also under the scanner for poor compliance, which are reportedly allowing anonymous fund transfers to madrassa-linked accounts. Terror outfits like JeM and Lashkar-e-Taiba are using crypto-mixing tools on the dark web to conceal origins of wallet transactions, informed intel sources.

The FATF’s recent alert has identified Pakistan as a repeat risk nation for technology-enabled money laundering linked to non-state actors. Any fresh discovery of digital wallets linked to terror financing can put Pakistan back in the FATF’s grey list and derail future IMF negotiations.

India Monitoring Pakistan’s Donation Drives

Intelligence sources told News18 that Indian agencies have already flagged Pakistan’s use of digital wallets into Kashmir-based terrorist sympathisers, particularly from accounts linked to Pakistani fintech firms.

Indian agencies are tracking cross-border crypto transactions linked to jihadi propaganda and online donation drives, amid intel warnings that urban radical networks may mimic Pakistan-based wallet models.

Pakistan was first placed on the grey list in 2008 for its role in financing terror groups. Since then, it has been repeatedly flagged for failing to curb terror funding and money laundering — issues directly tied to its long-standing policy of supporting cross-border terrorism, including against India.

From June 2018 to October 2022, Pakistan remained on the grey list for over four years, during which its economy suffered from reduced foreign investment, higher borrowing costs, and increased international scrutiny. The country barely managed to exit the list after implementing an action plan under intense global pressure.

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