FATF’s June meet: India will hand dossier on Pak to get it back on grey list

“We will take it up (at the FATF meeting). Work is under progress to prepare for it,” a government source said. The government is preparing a dossier on “omissions and commissions” by Pakistan in tackling terror financing and is likely to submit it at the next plenary meeting of FATF to be held in June, sources said.

When Pakistan was taken off the grey list in 2022, it was kept in the enhanced follow-up category by the FATF having been compliant with other recommendations but being ‘partially compliant’ with one recommendation (recommendation 38 of FATF) — a deficiency relating to the coverage of predicate offences. Originally, it was found to be non-compliant on recommendation 38 (R.38), the status for which was then changed to ‘partially compliant’ in the October 2022 review.

In simpler terms, R.38 is regarding mutual legal assistance (MLA) for freezing and confiscation of proceeds of crime, mainly when crime has happened elsewhere and proceeds are in the relevant country (Pakistan in this case).

Recommendation 38 of the FATF requires countries to have authority to take expeditious action in response to requests by other countries to identify, freeze and seize property laundered, proceeds from money laundering or predicate offences. Though Pakistan had issued guidelines for MLA, FATF had noted the deficiencies in its scheme for providing assistance to other countries.

“The MLA Act is silent on Pakistan obtaining a domestic restraint order upon request in a case where the requesting jurisdiction does not have either a restraint order or a confiscation order. This is a deficiency. These deficiencies with restraint are particularly problematic as ex parte restraint is a crucial practical step to properly support with-notice confiscation processes. A minor deficiency remains relating to the coverage of predicate offences. The deficiency relating to Pakistan’s inability to confiscate property of corresponding value remains,” the evaluation report had then stated.

Separately, India will raise objections to a review of World Bank funding to Pakistan which is also slated for June, sources said. In January this year, World Bank and Pakistan launched a new Pakistan Country Partnership Framework (CPF) for FY2026-35, outlining areas of strategic collaboration between the Bank and Pakistan for the coming decade including indicative lending of $20 billion between FY26-35.

On May 2, The Indian Express had reported about the Indian government considering the move at FATF to curb financial flows that, it says, help Pakistan fund terror activities. This was part of its escalatory matrix against Pakistan in the wake of the terror attack in Pahalgam on April 22 that killed 25 tourists and one local resident.

Pakistan was put in the grey list in June 2018, and faced “increased monitoring” till it was removed in October 2022.

Being in this list adversely impacts FDI and capital flows as businesses have to undertake enhanced due diligence. Government officials had earlier said this had helped curtail illicit fund flows from Pakistan into India, especially into J&K.

At present, FATF has put 25 countries including Kenya, Monaco, Nepal, South Africa, Vietnam in the grey list and three countries — North Korea, Iran and Myanmar — in the black list.

To initiate a nomination process demanding a grey list status for Pakistan, India will require the support of other FATF member countries. The plenary is the decision-making body of the FATF, which meets three times a year, usually in February, June and October. The FATF has 40 members, and over 200 jurisdictions have committed to the FATF recommendations through the FATF-Style Regional Bodies.

Pakistan is not a member of FATF, but of Asia Pacific Group on Money Laundering (APG), the largest FATF-Style Regional Body. India is a member of APG as well as of the FATF.

India had earlier this month also raised objections at the board meeting of the International Monetary Fund (IMF) for the release of funds under the $7-billion aid package for Pakistan that commenced July 2024, citing diversion of funds by the neighbouring country for nefarious activities and terror attacks.

Sources said that India took up the case of Pakistan with IMF’s Managing Director Kristalina Georgieva before the May 9 board meeting held to review the release of funds to Pakistan.

Even as India stated that it is not against any development-related funding to any country, it objected to the timing of the release of the funds to Pakistan coming in the aftermath of the Pahalgam terror attack. India had also reached out to ministers of IMF board member nations against the multilateral agency’s aid package to Pakistan earlier this month, sources said.

“India is not averse to any country receiving money for development purposes. But the IMF funding was not the right thing to do at a time when there were border tensions between India and Pakistan and a situation of war. Also, Pakistan has a history of spending not for people, but for buying arms,” an official said.

The Indian government is learnt to have presented evidence in the form of the presence of senior Pakistani military officials at the funeral of designated terrorists along with data to show an increase in procurement of arms and munitions by Pakistan in the years that it received funding from multilateral agencies such as the IMF.

Pakistan spends, on an average, around 18 per cent of its general budget on “defense affairs and services”, while even conflict-affected countries spend on average far less (10-14 per cent of their general budget expenditure), as per public data, the source said. Further, Pakistan’s arms imports increased dramatically from 1980 to 2023 by over 20 per cent on average in the years when it received IMF disbursements in comparison to years when it did not, sources said.