Pakistan’s removal from the Financial Action Task Force (FATF) grey list in 2022 was initially seen as a positive step for financial governance. However, the recent decision by FATF in 2025 to subject Pakistan to continued monitoring post-delisting has raised doubts. This move comes amid worries about Pakistan’s ability to effectively combat money laundering and terror financing.
FATF’s decision to keep Pakistan under follow-up monitoring post-delisting highlights concerns over the country’s commitment to tackling financial crimes. The report emphasizes that being removed from the grey list does not guarantee sustained compliance, especially in regions with underlying structural weaknesses and illicit financial networks. The Asia-Pacific Group (APG) oversees Pakistan’s compliance post-delisting as it is not a full FATF member.
The report underscores the caution expressed by FATF President Eliza D’ Anda Madrazo regarding the limitations of delisting as a shield against criminal activities. It points out that countries exiting the grey list are still subject to follow-up reviews. Recent intelligence reports have revealed that Pakistan-based militant groups have exploited domestic digital payment platforms to raise funds for illicit activities, indicating vulnerabilities in Pakistan’s financial ecosystem.
Concerns also arise from Pakistan’s slow progress in regulating virtual assets and service providers. FATF has expressed alarm over Pakistan’s failure to explicitly regulate virtual assets, highlighting the risks of regulatory lapses in one jurisdiction affecting others. The report stresses the need for robust enforcement of standards to prevent misuse of digital assets for illicit purposes.
Despite its grey-list exit, Pakistan continues to face challenges in combating money laundering, particularly in its vast informal economy. The prevalence of illegal remittance systems like hawala poses significant risks for financial crimes. The persistence of militant groups, weak enforcement of regulations, and cash-based transactions further contribute to Pakistan’s vulnerabilities, necessitating continued monitoring by FATF.
