In response to the recent terror attack in Pahalgam on April 22, India is considering a multi-pronged strategy to curtail Pakistan’s alleged terror financing networks, with key efforts focused on the Financial Action Task Force (FATF) and the International Monetary Fund (IMF), according to Indian Express.
According to senior government sources, India is weighing the option of seeking Pakistan’s return to the FATF ‘grey list’, a designation that increases scrutiny on financial transactions and foreign investments. Pakistan was removed from the list in October 2022 after four years of “increased monitoring.” Officials believe the period saw a decline in illicit fund flows into India, particularly into Jammu & Kashmir.
To initiate this process, India will need backing from other FATF member nations during the body’s plenary meetings, which occur in February, June, and October. India’s outreach has already seen diplomatic traction, with 23 FATF member countries—including the US, UK, France, Germany, and Saudi Arabia—sending condolence messages following the Pahalgam attack.
Simultaneously, India is expected to raise concerns at the upcoming IMF board meeting in May, questioning the continued disbursement of a $7-billion aid package to Pakistan. The Extended Fund Facility (EFF), agreed upon in July 2024, is under review for the next $1 billion tranche. India is likely to object, citing alleged misuse of funds for “nefarious” purposes, including terror activities.
While Pakistan is not a member of the FATF, it belongs to the Asia Pacific Group on Money Laundering (APG), a FATF-style regional body that also includes India. FATF evaluations and grey-listing processes rely on peer reviews and evidence-based assessments of countries’ anti-money laundering and counter-terrorism financing regimes.
India’s potential moves come after the FATF, in its September 2024 mutual evaluation report, flagged terror threats from Islamic State and al-Qaeda-linked groups active around Jammu and Kashmir. New Delhi maintains that sustained global pressure is necessary to ensure credible and irreversible action against terrorism originating from Pakistan.
