Pakistan is back on FATF radar, says being out of the grey list is not an exemption from terror funding, will action be taken again?

The Financial Action Task Force (FATF), an organization that monitors terrorist funding worldwide, has issued a strong reprimand to Pakistan. The FATF warned Pakistan that removing it from the grey list in October 2022 is not a solid safeguard against terrorist financing and money laundering activities. This raises the possibility that Pakistan may face another FATF crackdown.

According to the report, the FATF has reprimanded Pakistan for reports that Jaish-e-Mohammed (JeM) is launching new online jihad classes to recruit women into its organization. These online classes will attempt to recruit women into the organization, connect them with jihad, and ultimately, these women will become terrorists. Following this report, the FATF has issued a warning to Pakistan. Officials say that such classes are conducted to mislead people in the name of education.

FATF reprimands Pakistan
FATF Chairperson Elisa de Anda Madrazo stated in a statement that digital financing is being misused to support terrorist networks and poses a serious threat to global security. Elisa de Anda Madrazo stated that they have intelligence reports of the use of digital wallets to fund and promote terrorism. She added that Pakistan has been monitored as part of a “follow-up” process since its removal from the grey list in 2022. “Pakistan was removed from our grey list in October 2022, and after any country is removed from the list, we continue the follow-up process, and in this case, since Pakistan is not a member of the FATF but is a member of the Asia-Pacific Group (APG), the follow-up process is being conducted by the APG,” she said during a press conference.

She added that “a country’s removal from the grey list does not guarantee that criminals, money launderers, or terrorists will not be active there.” The FATF has warned all member countries to strengthen their efforts to curb terrorist financing. Following this warning, scrutiny of Pakistan’s digital financial system and fintech companies has intensified.

Terrorist networks are active in Pakistan
Indeed, Pakistani terrorist networks are now using digital wallets and crypto platforms to transfer funds from Karachi, Quetta, and Peshawar to Afghanistan and Gulf countries. Following the FATF crackdown on hawala channels, terror financiers have created new avenues for the flow of funds through prepaid wallets, mobile banking apps, and fake NGO accounts. Micro-donations are being collected through small charity wallets on apps like JazzCash, EasyPaisa, and SadaPay, which are then used for terrorist logistics. Digital forensic investigations by Western agencies have revealed that these funds are flowing into Pakistan’s fintech system via Dubai-based wallets and crypto exchanges, many of which are controlled by ISI-linked operatives.