FATF warns Pakistan, says greylist exit doesn’t guarantee immunity from terror financing and money laundering scrutiny

The Financial Action Task Force (FATF) has cautioned Pakistan that being taken off its greylist in 2022 doesn’t mean it’s free from monitoring, stressing the need for continued vigilance against terror financing and money laundering. The Paris-based watchdog also said Nepal will remain on the greylist, pointing to ongoing gaps in financial oversight across South Asia.

Speaking at the FATF plenary session in Paris, President Elisa de Anda Madrazo said that countries previously on the greylist must continue improving their systems. “Delisting is not the end of the process. Any jurisdiction that has been on the greylist is still vulnerable to criminal activity, including money laundering and terror financing,” she said.

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Pakistan was taken off the greylist in October 2022 after four years of close monitoring. However, the Asia-Pacific Group (APG) continues to assess Islamabad’s follow-up progress. FATF officials noted that while Pakistan introduced legal and institutional reforms, gaps remain in implementation and enforcement, especially in tracking digital fund transfers and monitoring non-profit organisations. Indian officials said these developments show that Pakistan’s risk profile remains high despite its delisting.

India has maintained that Pakistan’s anti-terror finance enforcement remains inconsistent and largely reactive. Officials cited evidence of cross-border fund flows supporting proscribed groups, including Jaish-e-Mohammad and Lashkar-e-Taiba.

Even as Pakistan faces fresh scrutiny after its delisting, Nepal continues to struggle with reforms. The FATF has decided to keep the country on its greylist, saying efforts to curb money laundering and terror funding remain inadequate.

Nepal was put back on the list in February this year after the watchdog pointed to weak enforcement in areas like real estate, cooperatives and informal money transfers. Despite new central bank rules and a reform roadmap, progress has been slow, FATF officials said.

In August, Nepal’s central bank instructed payment service providers to freeze assets linked to UN-listed terrorists. The government also tightened supervision of cooperatives – long seen as a weak spot in the country’s financial network. But FATF officials said more needs to be done to improve inter-agency coordination and ensure meaningful prosecution of financial crimes.

Elisa de Anda Madrazo’s closing remarks summed up FATF’s stance: “Our message to all countries – including those that have been delisted – is simple: stay vigilant, enforce your laws, and don’t let criminals exploit your systems.”