India Seeks FATF Greylisting of Pakistan in 2025: Dossier Highlights Terror Funding Risks

Introduction

In a decisive move ahead of the upcoming Financial Action Task Force (FATF) evaluation cycle, India is preparing to submit a comprehensive dossier aimed at reinstating Pakistan onto the FATF grey list in 2025. This action reflects growing concerns over Pakistan’s alleged lapses in curbing money laundering and terrorism financing, reigniting regional and global debates about financial transparency and security. As the FATF intensifies its scrutiny of high-risk jurisdictions, India’s intervention underlines the continued geopolitical and financial ramifications of greylisting by the world’s foremost anti-financial crime body.

Table of Contents

• Introduction
• What is the Financial Action Task Force (FATF)?
• FATF Grey List and Black List Explained
• Pakistan’s Grey List History (2018–2022)
• India’s 2025 FATF Dossier: Key Allegations
• Impact of Greylisting on National Economies
• FATF: A Global Watchdog for Financial Integrity
• Comparative Spotlight: FATF Scrutiny on Other Nations
• FAQs: Understanding FATF Greylisting
• Conclusion: FATF’s Growing Geopolitical Influence

What is the Financial Action Task Force (FATF)?

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 at the G7 Summit in Paris to combat the growing threat of money laundering and terrorism financing. Comprising 40 member nations, including India, the United States, China, and the UK, the FATF formulates global standards—known as the 40 FATF Recommendations—to strengthen financial transparency and prevent illicit fund flows.

Its main functions include:

• Assessing countries’ AML/CTF (Anti-Money Laundering/Counter-Terrorist Financing) frameworks
• Issuing advisories and compliance reports
• Maintaining global monitoring lists: the grey list and black list

Through its Mutual Evaluation Reports (MERs), the FATF tracks compliance and guides reforms for non-compliant or high-risk nations.

FATF Grey List and Black List Explained

The FATF enforces compliance via two major listings:

Grey List (Jurisdictions Under Increased Monitoring)

• Indicates strategic deficiencies in AML/CTF frameworks.
• Countries agree to work with FATF on corrective measures.
• Subject to close monitoring and periodic reporting.
• As of 2025, 24 nations remain on the grey list.

Consequences of Greylisting:

• Decreased investor confidence
• Delays in loans from global financial institutions like the IMF
• Enhanced due diligence by international banks
• Damage to sovereign credit ratings

Black List (High-Risk Jurisdictions)

• Countries with serious AML/CTF failures and no political commitment to reform.
• Currently includes North Korea, Iran, and Myanmar.
• Leads to economic sanctions, trade isolation, and severe international pressure.

Pakistan’s Grey List History (2018–2022)

Between 2018 and 2022, Pakistan was placed on the FATF grey list due to repeated failures in monitoring terror financing and enforcing AML regulations. Key issues cited included:

• Inadequate action against UN-designated terrorist groups
• Weak regulatory supervision of non-profit and financial sectors
• Failure to prosecute and convict key terror financiers

During its greylisting:

• Foreign investments into Pakistan dipped significantly.
• IMF and World Bank loans became conditional on FATF compliance.
• Terrorist funding channels into regions like Jammu & Kashmir saw disruptions, according to Indian officials.

The FATF removed Pakistan from the grey list in October 2022 following substantial commitments, but India and other watchdogs argue that some of those reforms were either temporary or under-implemented.

India’s 2025 FATF Dossier: Key Allegations

India is now preparing a detailed dossier for FATF review, expected to present:

• Evidence of continued financing of proscribed terrorist entities
• Non-compliance with FATF Recommendation 6, which targets financial support to terrorism
• Surveillance data suggesting money trails linked to cross-border insurgency
• Concerns about shell companies and non-profit misuse in funding subversive activities

According to Indian officials, the intention is not political but rooted in regional and global financial stability. India aims to:

• Reinstate monitoring pressure on Pakistan
• Prevent terror-linked fund flows into conflict zones
• Enhance South Asia’s financial integrity

Impact of Greylisting on National Economies

When a country is placed on the FATF grey list, the consequences go beyond reputational damage. Greylisted nations often face:

Foreign Investment Decline

• Investors perceive increased risk and regulatory uncertainty.
• Pakistan experienced a sharp dip in FDI during its 2018–2022 greylisting period.

Loan and Aid Restrictions

• Global lenders like the IMF and World Bank impose stricter conditions.
• Greylisting often delays disbursement of critical financial support.

Banking Limitations

• Global banks and financial institutions conduct enhanced due diligence.
• Cross-border transactions become costlier and slower.

Policy Pressure

• Countries are required to overhaul financial regulations.
• Significant legal and institutional reforms become necessary to exit the list.

For emerging economies like Pakistan, these effects can disrupt development and create fiscal stress, limiting their global integration.

FATF: A Global Watchdog for Financial Integrity

As the premier global body for monitoring financial misconduct, the FATF is more than just a compliance agency—it is a tool of financial diplomacy. Its mandates contribute to:

Standardization Across Borders

• FATF Recommendations offer a uniform AML/CTF framework for 200+ jurisdictions.

Early Warning Systems

• Regular evaluations uncover vulnerabilities before they escalate.

 International Cooperation

• FATF facilitates collaboration between nations in tracking illicit fund flows.

Policy Influence

• Being on a FATF list influences a country’s access to global financial systems and forums.

FATF’s findings are increasingly used by governments, multinational corporations, and financial institutions to assess country risk.

Comparative Spotlight: FATF Scrutiny on Other Nations

India’s demand for re-evaluation of Pakistan aligns with similar precedents globally. Here’s how FATF scrutiny impacted others:

• Iran: On the FATF black list, facing near-total banking isolation and trade sanctions.
• Myanmar: Blacklisted for institutional breakdowns and military-linked financial abuses.
• Malta: Greylisted in 2021 over high-risk banking practices; quickly implemented reforms and was delisted by 2022.

These examples highlight FATF’s expanding influence and the global importance of compliance.

FAQs: Understanding FATF Greylisting

1. What is the FATF Grey List?
The grey list comprises countries that have strategic AML/CTF deficiencies but are working with the FATF to resolve them. They are under increased monitoring.

2. Why is India targeting Pakistan at the FATF?
India alleges Pakistan has not fully implemented FATF’s requirements, particularly in monitoring and prosecuting terrorist financing.

3. What happens if a country is greylisted?
Greylisted countries face enhanced financial scrutiny, reputational damage, investment flight, and restricted access to international loans.

4. What is the difference between FATF’s grey list and black list?

• Grey List: Countries with deficiencies but committed to reforms.
• Black List: Countries with high-risk regimes and no reform effort; face international sanctions.

5. Who are the current countries on the black list?
As of 2025, the FATF black list includes North Korea, Iran, and Myanmar.

Conclusion: FATF’s Growing Geopolitical Influence

India’s push to reintroduce Pakistan to the FATF grey list underscores the expanding role of financial oversight in global diplomacy. In a world where funding routes are increasingly opaque and transnational, tools like the FATF serve as vital checkpoints. They not only uphold financial integrity but also serve as deterrents against state-sponsored illicit activities.

With geopolitical tensions and cross-border security risks on the rise, FATF’s decisions will remain instrumental in shaping economic access and regional stability. India’s dossier is a signal—not only to Pakistan but to the global community—that financial accountability cannot be optional.

Key Takeaways Table