At Davos, Pakistan agreed to join President Trump’s new ‘Board of Peace’, alongside a list of other states with uneven records on governance and human rights. The initiative, initially intended to oversee the Gaza ceasefire, appears to be expanding into a broader project aimed at reshaping global governance outside of the structures of the United Nations. The move sees Islamabad attempt to burnish its credentials as a responsible international actor, however, recent events, particularly over the past twelve months, call into question Pakistan’s credibility in such an initiative. Most notably, unresolved terrorist financing risks remain present in the country, and ahead of the Financial Action Task Force’s (FATF) February plenary, such allegations warrant greater attention.
In October 2022, the FATF, responsible for providing the recommendations that form the basis of the global anti-money laundering and countering terrorist financing framework, announced that Pakistan would no longer be ‘under increased monitoring.’ This decision followed the organization’s assessment that Islamabad had taken sufficient steps to address deficiencies in countering the financing of terrorism. Pakistan had been placed under increased monitoring for the third time in a decade during the June 2018 plenary of the FATF and was deemed non-compliant or partially compliant on a number of the organization’s 40 recommendations, including recommendation six relating to the targeted financial sanctions on suspected and designated terrorists. By the October 2022 plenary, Pakistan’s perceived compliance had increased significantly.
It’s no coincidence that earlier that year, a Pakistani court sentenced Hafiz Saeed, the founder and leader of the terrorist organization Lashkar-e-Taiba (LeT), to 31 years in prison. Despite being accused of orchestrating multiple mass casualty terrorist attacks, including the 2008 Mumbai attacks, and carrying a $10 million bounty from the US State Department, Saeed was convicted not for terrorism itself but on terrorism financing charges. Saeed’s longstanding immunity in Pakistan had previously been a key point of contention between Pakistan and the FATF, making his 2022 conviction appear a prerequisite of the country’s removal from ‘increased monitoring,’ or the ‘grey list.’ Yet, more than three years on, Pakistan appears to have reverted to the same patterns of behavior that initially drew FATF scrutiny, with LeT, its offshoots, including The Resistance Front (TRF), and other high profile terrorist groups, such as Jaish-e-Mohammad (JeM), continuing to operate and fundraise freely inside the country.
Old Habits Die Hard
Since 2022, by the FATF’s own criteria, Pakistan has seemingly fallen short of compliance with several key recommendations, most notably recommendation five, which requires states to suppress the financing of terrorism, and the aforementioned recommendation six, on multiple occasions. By failing to disrupt the evolving terror financing networks that exist inside the country, Islamabad has facilitated a resurgence of militancy in Jammu and Kashmir, which culminated in last year’s Pahalgam attack and the subsequent escalation between India and Pakistan. The group responsible for the attack, The Resistance Front (TRF), is an offshoot of Saeed’s LeT, and whilst this was the most high-profile operation carried out by the group, it was far from the only one claimed by TRF since its founding in 2019.
In September 2023, Indian security forces engaged in a week-long shootout with terrorists from TRF. The encounter resulted in the death of senior TRF and LeT militant Uzair Khan. It also marked the continuing escalation of violent attacks carried out by the TRF since it was proscribed as a terrorist organization in India at the start of 2023. The following year, in June 2024, TRF claimed responsibility for an ambush attack against a bus carrying pilgrims in the Reasi district of Jammu and Kashmir, killing nine civilians and injuring a further 41. Months later, TRF targeted workers in Ganderbal, killing seven more civilians. In hindsight, this string of attacks, which appeared to be growing in severity, and targeted both security personnel and civilians, made the events of April 2025 in Pahalgam almost inevitable.
This is significant in the context of the forthcoming FATF plenary because of TRF’s financial dependence on LeT, which has continued to evade sanctions enforcement in Pakistan. In 2019, the FATF made no secret of its assessment that Pakistan had failed to demonstrate a ‘sufficient understanding of Pakistan’s transnational TF [terrorist financing] risks.’ This remains the case over six years on. To escape increased scrutiny from law enforcement, LeT has incorporated new fundraising practices, including the increased use of cryptocurrencies and digital wallets.
New Financing Methods, New Challenges
The decentralized nature of cryptocurrencies enables terrorist organizations like LeT to evade detection and tracking through utilizing techniques such as transfer loops, where funds are moved through multiple digital wallets before being cashed out by the intended recipient, and fragmented deposits, in which smaller sums of money are distributed across several accounts to avoid the red flags that would be raised from a single, larger amount, being deposited at once to one location. It is worth noting that Pakistan itself in recent months has turned to cryptocurrencies to bypass traditional financial oversight, again in an attempt to endear the government to the Trump administration.
Terrorist use of online-only banks has also proved particularly troublesome for Pakistan’s compliance with FATF guidelines, as privacy laws prohibit state monitoring of certain digital wallets. To this end, Pakistani platforms, such as EasyPaisa and SadaPay have proved particularly popular among terrorist groups. As a result, LeT has remained operational and continued to receive financial support from donors both inside and outside of Pakistan. By extension, this has enabled offshoots such as TRF, whose escalating attacks in Jammu and Kashmir have contributed to a rising civilian death toll and to increased regional instability. Meanwhile, Pakistan has little incentive to respond in the absence of greater FATF scrutiny.
Pakistan’s inaction on this front has not gone unnoticed by other terrorist groups within the country either. Alongside LeT, JeM has also explored new avenues of securing funding, seemingly without sanction. Spotting an opportunity from events in the Middle East, JeM sought to exploit the plight of Gaza’s population to establish sham charitable causes. Hammad Azhar, son of JeM leader Masood Azhar was allegedly able to raise funds under the guise of a charity called ‘Gaza Aid.’ Instead of reaching Gaza, however, the funds were used to help rebuild JeM facilities following military action by India in May last year. More transparently, the group appealed to sympathizers to help fund the so-called ‘Complete Winter Survival Kits’, which are required for the mountainous terrain of Jammu and Kashmir. Both LeT’ and JeM’s ability to recover from their military losses following Operation Sindoor in 2025 has been owed in large part to their ability to sustain crowdfunding in spite of Pakistan’s commitments to crack down on terrorist financing.
Jumping the Gun
Crucially, it is not just that Pakistan is unaware or otherwise unwilling to address these terrorist financing issues, but that, in some cases, the state is actively aiding the revival of these entities. Following last May’s clash with India, several terrorist training camps and headquarters in Pakistan were destroyed by Indian military strikes. Since then, concerns have been raised that Pakistan may be supporting the reconstruction of said camps. In Muzaffarabad, Pakistan is believed to be rebuilding the Markaz Syedna Bilal complex, an alleged JeM training facility. In October 2025, Federal Minister for Kashmir Affairs, Rana Muhammad Qasim, visited the location, underscoring the government’s close ties to the project. Elsewhere, Hafiz Talha Saeed, son of imprisoned LeT chief Hafiz Saeed, has been spotted addressing crowds in the presence of government ministers.
Taken together, these developments suggest that Pakistan’s removal from the FATF ‘grey list’ was premature. The resurgence of domestic terrorist groups, such as Lashkar-e-Taiba and Jaish-e-Mohammad, and their continued operational capacity indicate non-compliance with FATF recommendations 5 and 6. At the very least, it implies that Pakistan does not have a grip on the terror financing networks that are present in the country. More troublingly is the evidence that elements of the Pakistani state are tolerating, or in some cases actively assisting, the revival of these organizations. History has shown that Pakistan’s admittance to the FATF ‘grey list’ has been met, at least initially, with greater state pressure on known terrorists and terrorist financing networks. It once again seems necessary that Pakistan is reconsidered for greater monitoring by the FATF, and the forthcoming February plenary provides the critical opportunity to act.
(February 5, 2026)
(The views expressed in this article are those of the author(s) alone and do not necessarily reflect the views of Geopoliticalmonitor.com or Cyber World Press.)
