Islamabad, Feb 1 (IANS) Pakistan’s removal from the Financial Action Task Force (FATF) grey list in 2022 was considered a sign of improved financial governance; however, the optimism surrounding the development has faded.
FATF’s announcement in 2025 to keep Pakistan under follow‑up monitoring despite its removal from the grey list, citing concerns over country’s ability and intention to curb money laundering and terror financing, demonstrated a reality that many analysts have stressed that delisting is not synonymous with achieving durable compliance, particularly in jurisdictions where structural weaknesses, informal economies, and networks of illicit finance remain rooted, as per a report.
“FATF President Eliza D’ Anda Madrazo articulated this caution clearly. Delisting, she stressed, ‘is not a foolproof shield” against criminal activity. Countries removed from the grey list continue to undergo follow‑up reviews, and in Pakistan’s case, this oversight is carried out by the Asia‑Pacific Group (APG), given that Pakistan is not a full FATF member. Her remarks were pointed: no country that exits the grey list is ‘bulletproof’ against the actions of money launderers or terrorist financiers,” the report in Asian News Post said.
“The warning was not abstract. It came amid alarming intelligence reports that Pakistan‑based militant group Jaish‑e‑Mohammad had exploited domestic digital payment platforms, including Easypaisa and SadaPay, to raise an estimated USD 14 million, allegedly earmarked for the construction of more than 300 new training camps across the country. The revelation reinforced longstanding fears that Pakistan’s financial ecosystem, particularly its digital and informal sectors, remains vulnerable to exploitation by extremist networks,” it added.
These concerns further increase due to Pakistan’s slow progress in regulating virtual assets (VAs) and virtual asset service providers (VASPs). In June last year, FATF expressed alarm over Pakistan not explicitly banning or regulating the use of VAs. In its latest report on global implementation of standards for VAs and VASPs, the watchdog urged all jurisdictions to enforce mitigation strategies, warning that regulatory lapses in even one nation can have cross‑border consequences. It highlighted the increasing use of stablecoins by terrorist financiers, drug traffickers, and state‑linked actors, and demanded implementation of Recommendation 15.
“Beyond the digital sphere, Pakistan’s vast informal economy poses an even more formidable challenge. Despite its grey‑list exit, money laundering remains widespread. On 12 March 2025, the Federal Board of Revenue (FBR) identified more than 70 real estate agents allegedly involved in transferring millions of dollars to the UAE through hawala and hundi networks,” the report said.
Despite being illegal, hawala is being used in cities like Peshawar, often called Pakistan’s hawala capital and Quetta, where it enables smuggling operations involving narcotics, weapons, and other contraband. Hawala systems create risks for money laundering and terror financing due to no supervision, ease of cross‑border settlement, and dependence on unregulated intermediaries, according to the report.
“Although Pakistan has exited the FATF grey list, the persistence of militant groups within its borders, the dominance of informal remittance systems, weak enforcement of regulations governing charities and religious institutions, and the prevalence of cash‑based transactions all contribute to ongoing vulnerabilities.”
“With an estimated 85 per cent of transactions occurring in cash and corruption remaining widespread, dismantling the hawala system or fully regulating virtual assets appears exceedingly difficult. These structural realities explain why FATF continues to monitor Pakistan closely and why concerns about its long‑term commitment to combating money laundering and terror financing remain unresolved,” it added.
–IANS
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