Global Financial Sanctions
India is preparing to urge the Financial Action Task Force (FATF), the global financial crime watchdog, to re-add Pakistan to its “grey list,” a move that could significantly impact Pakistan’s economic standing.
According to a senior government source in New Delhi, India intends to formally raise this demand during upcoming FATF meetings, citing ongoing concerns over Pakistan’s compliance with anti-money laundering and counter-terror financing obligations.
Pakistan was previously placed on the FATF grey list in June 2018 due to its failure to fully implement measures to curb money laundering and terror financing. This designation subjected Pakistan to increased monitoring and scrutiny by global financial institutions, which in turn affected foreign investment and access to international credit.
However, after taking various corrective actions, Pakistan was removed from the grey list in October 2022. The delisting was seen as a positive development for the country’s struggling economy, helping to restore confidence among international lenders and improve access to financial support.
India’s renewed push comes against the backdrop of persistent diplomatic tensions and allegations of cross-border terrorism. The Indian government argues that Pakistan has not done enough to dismantle financial networks linked to extremist groups operating in the region.
New Delhi’s efforts at FATF are likely aimed at increasing international pressure on Islamabad, particularly at a time when Pakistan is grappling with a deepening economic crisis and seeking assistance from multilateral lenders.
Meanwhile, the FATF itself has noted that India also faces significant money laundering risks, many of which stem from illicit domestic activities. On September 19, 2024, the watchdog acknowledged that India must strengthen its internal controls to address these vulnerabilities effectively.
In contrast, Pakistan has been working to enhance its financial transparency and regulatory frameworks. Prime Minister Shehbaz Sharif, in a statement on August 22 last year, emphasized the potential of the Buna-Raast connectivity project to catalyze the development of a broader regional payment system.
He argued that the initiative could place Pakistan on a sustainable economic path while reinforcing its commitment to FATF standards.
As geopolitical rivalries intensify, the FATF’s upcoming decisions will likely carry significant economic and political implications for both India and Pakistan.
