India To Push For Pakistan’s Return To FATF 'Grey List' Over Its Failure To Curb Terror Funding

India is preparing to submit a detailed dossier to the the global money laundering and terror financing watchdog Financial Action Task Force to reinstate Pakistan on the ‘grey list’ for its failure to curb terror financing, the Indian Express reported,citing government sources.

The move follows allegations of non-compliance with key legal commitments that Pakistan had made before it was removed from the list in October 2022.

“Yes, we will take it up. Work is under progress to prepare for it,” a government source told IE. The dossier is expected to be submitted at FATF’s next plenary meeting, likely scheduled for June.

India is also set to raise the matter during a scheduled World Bank review of funding to Pakistan, citing similar concerns.

The development comes amid heightened tensions between the two neighbours, especially following the 22 April terror attack in Pahalgam that claimed 26 civilian lives.

Pakistan had been under FATF’s “increased monitoring” from June 2018 until October 2022. This classification, commonly known as the grey list, negatively affects foreign direct investment and capital inflows as it compels businesses to adopt stricter due diligence practices. 

Citing officials, IE reported that the grey list status had previously helped reduce illicit funding from Pakistan into India, particularly in Jammu and Kashmir.

India has also voiced concerns at the International Monetary Fund (IMF) board over an aid package to Pakistan, citing misuse of funds for “nefarious activities and terror attacks.”

To formally seek Pakistan’s re-listing, India will require the backing of other FATF member states. The FATF has 40 members, and over 200 jurisdictions are committed to its standards via regional bodies.

While Pakistan is not a FATF member, it belongs to the Asia Pacific Group on Money Laundering (APG), to which India also belongs.