The Paris-based Financial Action Task Force (FATF), the global watchdog against money laundering and terrorist financing, is set to review Pakistan’s performance next month. Pakistan was placed on the Grey List in June 2018 under enhanced monitoring for its persistent failure to curb terrorist financing. Since then, its progress has been periodically reviewed, only to reveal recurring deficiencies.
At the October 2021 FATF plenary, Pakistan was again retained on the Grey List for failing to prosecute and confiscate the assets of United Nations–designated terrorists. The outcome document noted: “The FATF encourages Pakistan to continue to make progress to address as soon as possible the one remaining CFT-related item by demonstrating that TF investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups.” FATF officials also highlighted Pakistan’s failure to implement global standards across several areas, leaving a high risk of money laundering. Notably, Turkey was also grey-listed at that session for inadequate action on anti-money laundering and counterterrorist financing.
Ahead of the February 2022 review, Pakistan has once again erected a façade of compliance. State-controlled media outlets are awash with reports of action against terrorist financing. These include a Lahore High Court observation that inciting the public to raise funds for “jihad” constitutes treason, and an order from the Federal Reserve Bank of Pakistan halting real estate transactions with convicted individuals.
Yet, beyond this smokescreen, little has changed. Terrorist groups of every hue continue to flourish under the patronage of the Pakistani establishment. Meaningful compliance would require severing ties with the anti-India and Afghanistan-centric militant networks long nurtured by the state.
So far, token action has been taken against Lashkar-e-Taiba (LeT) and its leader Hafiz Saeed. But Pakistan has consistently evaded action against other LeT leaders, and more significantly, against Jaish-e-Mohammed (JeM) and its chief, Masood Azhar. Despite Pakistan declaring Azhar “untraceable,” he continues to appear in domestic media—meeting Taliban leaders, issuing calls for jihad, and publishing writings advocating violence.
Meanwhile, JeM remains active. In January 2022, the group held a public event in Rawalakote, Pakistan-occupied Kashmir, where it claimed responsibility for a terrorist attack in Srinagar and openly solicited funds for future operations. The meeting was addressed by JeM’s local chief, Muhammad Illyas.
The supposed crackdown has not deterred LeT either. Its front organisation, Falah-e-Insaniyat Foundation, continues to operate in Punjab and PoK, conducting recruitment and fundraising under the guise of humanitarian work. In November 2021, it organised events, including a medical camp in Gujranwala, to collect donations. Its leader, Abdur Rauf, continues to deliver sermons from Markaz Al Qadsia in Lahore.
These facts expose Pakistan’s claims of progress as hollow. Its desperation to escape FATF’s Grey List is understandable: the designation has severely restricted its access to international loans and investment at a time when its economy faces one of its worst crises. According to a 2021 study by Islamabad-based think tank Tabadlab, Pakistan has suffered GDP losses worth USD 38 billion from repeated grey-listing, including export losses of USD 4.5 billion and foreign direct investment losses of USD 3.6 billion.
Yet Pakistan’s economic hardship cannot excuse its failure to dismantle terrorist financing networks. Its plight is rooted not merely in FATF sanctions but also in its skewed geopolitical and economic priorities, where scarce resources continue to be diverted into sustaining extremist infrastructure instead of addressing low growth, high inflation, and unemployment.
The reality is that Pakistan has never shown genuine intent to confront extremism or resolve its chronic economic problems. Until its rulers choose substance over rhetoric, Pakistan’s performance at FATF will remain unchanged, and its self-inflicted crisis will only deepen.