India to Urge FATF to Re-list Pakistan on Grey List Amid Rising Tensions

 New Delhi | May 23, 2025 — India is preparing to raise the issue of Pakistan’s financial conduct with the Financial Action Task Force (FATF), urging the global watchdog to reclassify Islamabad under its “grey list” of jurisdictions subject to increased monitoring, a senior Indian government official confirmed on Friday.

“We will be taking it up (with the FATF),” the official told PTI, when asked whether India would formally push for Pakistan’s return to the grey list. The move follows a series of escalatory developments in the region and renewed concerns about the misuse of international financial aid by Pakistan.

Pakistan was previously placed on the FATF grey list in 2018 for failing to adequately counter terror financing and money laundering. The country was removed in 2022 after what FATF described as “significant progress.” That removal was a critical step for Pakistan’s economic recovery, helping it secure funding from multilateral lenders. However, India now contends that Pakistan has regressed on key commitments.

The renewed push comes in the aftermath of the April 22 terror attack in Pahalgam, Jammu and Kashmir, in which 26 civilians were killed. India has since launched Operation Sindoor, targeting terror infrastructure in Pakistan and Pakistan-Occupied Kashmir (PoK). The operation was followed by Pakistani artillery shelling and drone incursions, further straining bilateral ties.

According to sources, New Delhi has obtained “credible evidence” that Pakistan continues to permit terror activities from its territory and is misusing funds obtained from international financial institutions. “Pakistan is diverting funds from multilateral agencies to purchase arms and ammunition,” one source alleged.

India is also expected to object to a forthcoming World Bank funding tranche to Pakistan. This follows the International Monetary Fund’s (IMF) recent decision to approve a $1 billion payment to Islamabad on May 9—coinciding with heightened cross-border hostilities.

The FATF grey list includes countries that have committed to resolving “strategic deficiencies” in their frameworks to combat money laundering, terrorist financing, and proliferation financing, but remain under close scrutiny. Inclusion on the list can significantly restrict a country’s ability to access global financial markets and secure development aid.

The FATF Plenary—the organization’s decision-making body—convenes three times a year: in February, June, and October. India is expected to raise its concerns during the upcoming June session.

This development marks another phase of intensifying diplomatic and economic pressure on Pakistan by India, as New Delhi continues to assert its stance on regional security, cross-border terrorism, and the misuse of international financial assistance.