Pakistan’s Finance Minister Mohammad Aurangzeb has issued a warning about the possibility of the country being re-listed on the Financial Action Task Force (FATF) grey list. He highlighted ongoing challenges in curbing financial transactions that support terrorist groups such as Jaish-e-Mohammed, which could trigger renewed international scrutiny.
He pointed out that an estimated 15 percent of financial transactions in Pakistan operate outside formal regulatory frameworks, lacking proper oversight and control. This significant gap in financial monitoring, he suggested, increases the risk of Pakistan falling back into FATF’s grey list (a status that could have serious economic and diplomatic consequences).
The core issue revolves around the financing of terrorism and money laundering, which continues to draw attention from global watchdogs. Despite previous measures, reports indicate that unregulated money transfers to militant organisations persist through traditional hawala channels as well as newer digital means.
Focus On Terror Funding Networks
Pakistan’s inclusion on the FATF grey list in the past was largely due to its inability to dismantle financial networks supporting terrorist groups. Organisations such as the Jaish-e-Mohammed and the Lashkar-e-Taiba maintain extensive funding operations, utilising informal cash movements, hawala systems and increasingly sophisticated digital platforms.
Aurangzeb emphasised the urgent need to bolster Pakistan’s financial regulatory infrastructure to combat these illicit flows. Failure to effectively regulate emerging fintech sectors, digital wallets and cryptocurrency transactions could expose the country to renewed FATF sanctions, he warned.
According to The Pakistan Tribune, the minister stressed immediate reforms to strengthen oversight mechanisms and close loopholes exploited by terror financing networks.
A History Marked By Scrutiny And Progress
Pakistan was first grey-listed by the FATF in 2018 amid global concerns over terror financing. The country managed to exit the grey list in 2022 following sustained efforts to address key compliance issues.
However, officials remain concerned about new vulnerabilities posed by unregistered fintech services and the rapid growth of crypto assets, which may evade current regulations.
The potential return to the FATF grey list would impact Pakistan’s international financial standing, foreign investment climate and overall economic health. Authorities continue to monitor and engage with international partners to ensure compliance with FATF recommendations and prevent financing of terrorism.
