India plans 2-pronged financial strike against Pak to curb terror funding: Report
India will take steps for Pakistan to be placed again on FATF's ‘grey list’, and will raise objections to IMF’s aid package, say media reports
As part of its response to the Pahalgam terror attack, India is said to be planning a two-pronged financial strike against Pakistan to throttle its funding of cross-border terrorism.
The first part of the strategy is to take all the necessary steps needed to ensure that Pakistan is placed back on the grey list of the Financial Action Task Force (FATF), the international money laundering and terror financing watchdog, according to sources quoted by the Indian Express.
The second move is for India to raise its concern with the International Monetary Fund’s (IMF) continued financing of a $7-billion aid package to Pakistan alleging diversion of funds for terror-related activities. The IMF deal for the 3-year aid package was finalised in July 2024.
IMF aid
India is said to be considering raising its objections against the IMF aid package to Pakistan at the upcoming meeting of the board of the IMF in May.
The present ongoing 3-year-long Extended Fund Facility (EFF) programme of the IMF consists of six reviews over the life of the bailout. The release of the next round of funding of about $1 billion will be dependent on the success of the performance review.
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Sources said that India is likely to point out to the diversion of funds by Pakistan for terror-related activities.
FATF grey list
Pakistan was put on the “grey list” of the FATF in June 2018, and was removed from the list in October 2022 after it made a commitment to curb the funding of terrorism. It took action, and jailed persons linked to terror groups, and also fined them and confiscated their assets.
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When a country is placed on the grey list, it adversely impacts the flow of capital and Foreign Direct Investment (FDI) since businesses have to ensure enhanced due diligence. Officials say that this had helped contain the flow of illicit funds from Pakistan to India, especially to Jammu & Kashmir.
If Pakistan is placed on the grey list again, there will be increased scrutiny on its financial flows.
Support of member nations
India will need the support of other FATF member nations to begin the process of reinstating Pakistan on the grey list. The plenary is the decision-making body of the FATF, and it meets thrice a year, usually in February, June, and October.
The FATF has 40 members, and it will not be an easy task for India to acquire sufficient support from other members countries. One probable indication of the support it can expect is the fact that as many as 23 FATF member countries sent condolence messages to New Delhi after the Pahalgam attack, including the US, UK, Saudi Arabia, UAE, Australia, France, Germany, and the European Commission.
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When Pakistan was removed from the grey list in 2022, India had said that “it was in the global interest that the world remains clear that Pakistan must continue to take credible, verifiable, irreversible, and sustained action against terrorism and terrorist financing emanating from territories under its control”.
In September 2024, the FATF in its mutual evaluation report had flagged the risk from terrorist groups for India. The report said that “the most significant terror threats seem to be related to the Islamic State or al-Qaeda linked groups active in and around Jammu & Kashmir”.