NEW DELHI: India is intensifying its diplomatic efforts to push for Pakistan’s re-inclusion in the Financial Action Task Force’s (FATF) grey list during the upcoming plenary session in June. This move follows a recent terror attack in Pahalgam, Jammu & Kashmir, which New Delhi sees as part of a continued pattern of cross-border terrorism backed by elements in Pakistan.
Indian officials argue that despite being removed from the grey list in 2022, Pakistan has failed to take credible and irreversible action against terror groups operating from its territory.
New Delhi has already begun consultations with key international partners to build support for its case, with sources confirming that India will also oppose fresh World Bank funding to Islamabad, citing concerns over its counter-terrorism track record.
What is FATF?
The Financial Action Task Force is an intergovernmental body founded in 1989 by the G7 to combat money laundering, terrorist financing, and the financing of weapons of mass destruction. Headquartered in Paris, FATF sets global standards and evaluates countries on their compliance with anti-money laundering (AML) and countering the financing of terrorism (CFT) measures.
The organisation currently has 39 members, including 37 countries and two regional organisations — the European Commission and the Gulf Cooperation Council. India joined as an observer in 2006 and became a full member in 2010. It also participates in regional FATF-style bodies like the Asia Pacific Group (APG) and the Eurasian Group (EAG).
FATF’s Grey and Black Lists
FATF places countries under two types of monitoring:
The grey list includes jurisdictions under increased scrutiny that have committed to resolving strategic deficiencies within a specific timeframe.
The black list includes countries deemed high-risk due to continued non-compliance. These nations face economic sanctions and financial isolation.
Countries on either list struggle to access international finance, including loans from institutions such as the International Monetary Fund (IMF) and the World Bank, both of which are closely aligned with FATF's standards.
Pakistan’s FATF Journey
Pakistan was first greylisted in 2008, removed in 2009, and placed under monitoring again from 2012 to 2015. It re-entered the grey list in 2018 and remained there until October 2022. Its removal came after FATF acknowledged that Pakistan had completed two action plans comprising a total of 34 tasks aimed at curbing money laundering and terrorist financing.
Broader Implications
The IMF recently released a USD 1 billion loan tranche to Pakistan, asserting that Islamabad had met its current reform targets. However, the loan came with 11 new conditions, including parliamentary approval for economic policies and reforms in energy pricing, highlighting the ongoing fragility of Pakistan’s financial governance.
India’s current push to re-list Pakistan is not just about diplomatic pressure but also about restricting Islamabad’s access to international finance until it takes genuine steps against terror groups. If successful, greylisting could once again damage Pakistan’s economic standing and complicate its efforts to secure foreign investment.
With 25 countries currently on FATF’s grey list, the upcoming plenary meeting could become a critical juncture for regional security diplomacy. For India, pressing the FATF lever is part of a broader strategy to hold Pakistan accountable and promote long-term stability in South Asia.