India Prepares FATF Dossier to Re-Greylist Pakistan Amid Terror Financing Concerns

In a bold diplomatic move, India is gearing up to present a detailed dossier at the upcoming June plenary of the Financial Action Task Force (FATF), pressing for Pakistan’s re-entry into the global watchdog’s “grey list.” The case hinges on Pakistan’s alleged regression on commitments made during its removal from the list in October 2022, particularly regarding terror financing and money laundering frameworks.

Pakistan remained under such monitoring from June 2018 to October 2022. (AP) | Financial Express

According to senior government sources, the dossier outlines a troubling trail of non-compliance, with Pakistan accused of failing to act decisively against UN-designated terror groups and their financial networks, including Lashkar-e-Taiba (LeT), Jaish-e-Mohammed (JeM), and their proxies such as The Resistance Front (TRF). India asserts that these groups continue to operate with impunity, exploiting financial loopholes and porous enforcement mechanisms.

Trigger: Pahalgam Terror Attack

The immediate catalyst for India’s renewed FATF push is the April 22 terror attack in Pahalgam, Jammu and Kashmir, where 26 civilians were killed. The Resistance Front claimed responsibility. Indian intelligence agencies have traced TRF’s logistics and funding to handlers operating in Pakistan-administered territory. Despite international condemnation, Islamabad has not taken concrete action, officials said.

Legal Gaps and FATF Violations

India’s dossier, reportedly already shared with key FATF members including the U.S., France, and Germany, accuses Pakistan of violating FATF’s Recommendation 5 (on criminalizing terrorist financing) and Recommendation 38 (on international cooperation for freezing terrorist assets). While Pakistan has made cosmetic changes—such as issuing procedural guidelines—its domestic legal system still lacks mechanisms for mutual legal assistance and cross-border asset restraint.

Economic Diplomacy and Global Appeal

In parallel, India is lobbying the World Bank and IMF to reconsider future funding to Pakistan, citing concerns about misuse of development finance for extremist infrastructure. The proposed $20 billion economic assistance package to Pakistan has raised eyebrows in New Delhi, where officials argue that financial aid could inadvertently fuel instability in the region if anti-terror safeguards are not in place.

A Precedent: 2018–2022 GreyListing

Pakistan previously spent over four years on the FATF grey list—from June 2018 to October 2022. During that time, foreign investment sharply declined, international borrowings grew costlier, and the country faced growing economic isolation. While Islamabad was delisted after implementing a 34-point action plan, India argues that many of those reforms were either symbolic or have since been reversed.

Diplomatic Road Ahead

For Pakistan to be re-listed, India must secure broad consensus among FATF’s 39 members. With geopolitical shifts and evolving counterterrorism priorities, the outcome remains uncertain. However, India appears determined to internationalize the issue and re-frame Pakistan’s conduct not just as a regional threat, but as a global security risk. “If the world is serious about stopping the financing of terror, there can be no selective blindness,” said a senior Indian official familiar with the matter.

The June FATF plenary, set to be held in Paris, could mark a turning point in South Asia’s terror financing narrative—with potential consequences rippling far beyond the subcontinent.

(With inputs from Financial Express)