FATF condemns Pahalgam terror attack: Why it's a diplomatic win for India and a warning shot for Pakistan

In a rare and unprecedented move, the Financial Action Task Force (FATF) – the global watchdog on terror financing – has directly condemned the April 22, 2025, terrorist attack in Jammu and Kashmir’s Pahalgam.

"Terrorist attacks kill, maim and inspire fear around the world. The FATF notes with grave concern and condemns the brutal terrorist attack in Pahalgam on 22 April 2025. This, and other recent attacks, could not occur without money and the means to move funds between terrorist supporters," the Financial Action Task Force (FATF) said in a statement issued in a document titled ‘Strengthening Efforts to Combat Terrorist Financing’.

The remarks by FATF are more than just diplomatic language; it’s a clear signal that the international community is no longer buying Pakistan’s denials and diversions.

This is big news for India. Not only does it vindicate New Delhi’s long-standing position that Pakistan continues to sponsor, harbour, and finance cross-border terrorism, but it also opens the door for renewed efforts to push Islamabad back onto the FATF grey list, where it rightfully belongs.

India’s diplomatic push is working

FATF’s public acknowledgment of the Pahalgam attack is unprecedented. For years, the watchdog has been cautious in naming specific incidents or countries when addressing global terror financing issues.

The FATF statement comes in the backdrop of Indian authorities highlighting Pakistan's persistent support for terrorism and its funnelling of multilateral funds for arms procurement.

According to sources quoted by news agency PTI, such action by Pakistan warrants that the country be put in the "grey list" of the FATF.

Ahead of the next meeting of the Asia Pacific Group (APG) of FATF on August 25 and the next FATF plenary and working group meeting on October 20, India is preparing a dossier on the omissions and commissions by Pakistan with respect to FATF anti-money laundering and terror financing norms. India will be submitting to the FATF for grey listing of Pakistan.

Why Pakistan should be worried?

Currently, there are 24 countries in FATF 'grey list'. These countries are under increased monitoring and they have to address strategic deficiencies to counter money laundering, terrorist financing, and proliferation financing.

Pakistan's history with FATF's 'grey list' dates back to February 2008, when it was placed in the monitoring list. In June 2010 it was removed from the list, only to be brought back in February 2012, and then removed again in February 2015.

It was brought back in the list again for the third time in June 2018, and was later removed in October 2022 with FATF asking Pakistan to continue to work with APG to further improve its anti-moneylaundering/combatting the financing of terror (AML/CFT) system.

Being grey-listed by the FATF isn’t just a symbolic slap. It has real, painful consequences for a country’s economy. When Pakistan was previously grey-listed (2018–2022), it suffered reduced foreign direct investment, stricter lending terms from IMF and World Bank, increased scrutiny on its banking sector, and a general erosion of financial credibility.

India knows this, and is likely coordinating with allies like France, the US, and even Gulf nations to build a consensus for putting Pakistan back on the grey list. The Pahalgam attack, and FATF’s condemnation of it, gives India a compelling entry point to trigger a formal review of Pakistan’s commitments.