FATF Increases Scrutiny on Pakistan over Terror Financing Compliance

Washington, January 30 – Although Pakistan’s legal framework aligns with the Financial Action Task Force (FATF) recommendations on paper, significant gaps remain in its practical implementation, raising concerns over compliance with global anti-money laundering and counter-terrorist financing standards.

The FATF’s 2025 update on terrorist financing risks highlights rapid changes in the methods used to fund terrorism. The report notes that terrorist groups linked to Pakistan are increasingly turning to fintech platforms instead of traditional banks to evade monitoring.

In the analysis published in ‘The Cipher Brief,’ Washington-based national security and foreign policy analyst Siddhant Kishore pointed out that ahead of the FATF plenary and working group meetings scheduled for February 2026 in Mexico City, Pakistan is expected to portray itself as a responsible partner in counter-terrorism efforts. Kishore wrote, “Away from the violence in South Asia, Pakistan will present its compliance reports, legal amendments, and reforms to build a positive image in conference rooms.”

However, Kishore emphasized that Pakistan’s financial regulations resemble those of many developing democracies only on paper. In reality, networks financing terrorism continue to adapt and operate actively. “This growing gap between form and practice will be a critical challenge for Western policymakers before the next FATF review,” he added.

Referring to open-source reports and documented financial intelligence patterns, the report states that terrorist groups based in Pakistan, including Jaish-e-Mohammed and Lashkar-e-Taiba, have not been dismantled but rather “modernized.”

The report further reveals that these United Nations-designated terrorist organisations exploit humanitarian crises, such as the Gaza conflict, to raise funds for their activities.

Kishore explained that individuals like Hammad Azhar, son of Jaish chief Masood Azhar, and his brother Talha Al-Saif are reportedly using digital wallets under the cover of relief appeals and mosque reconstruction projects to gather funds.

These networks collect money through micro-donations and cryptocurrencies, using dispersed wallet structures and chain-hopping between different platforms to avoid detection, according to the report.

The funds are allegedly used to strengthen terrorist infrastructure, including establishing over 300 mosques and rebuilding sites damaged during India’s 2025 ‘Operation Sindoor,’ which were linked to Lashkar training camps.

The report urges that at the upcoming FATF meeting in Mexico, delegations from the United States and the European Union should press for a “results-based evaluation” of Pakistan. This should focus on ongoing investigations, verified asset seizures, and the actual disruption of networks facilitating terrorist financing.