Pakistan risks FATF grey list return over unregulated digital transactions, warns finance minister Aurangzeb

The Pak FM's remarks further bolster New Delhi’s long-held claim that Pakistan’s state-backed terror financing makes FATF oversight essential, as the country continues to threaten global financial stability and security.

Pakistan could once again be placed on the Financial Action Task Force (FATF) grey list if unregulated digital transactions are not brought under a proper legal and supervisory framework, the country's Finance Minister Muhammad Aurangzeb warned on Saturday.

Speaking at the Leadership Summit on Blockchain and Digital Assets: Technology and Innovation, Aurangzeb said that nearly 15 percent of Pakistan’s population is engaged in unregulated digital transactions, posing a serious risk to the country’s financial credibility.

“If such large-scale activity continues unchecked, it’s not a matter of if but when we land in trouble again as a sovereign state,” he said, recalling that Pakistan had exited the FATF grey list “with great difficulty” after six years, reported Pakistani daily The Express Tribune.

The minister revealed that more than 25 million Pakistanis are involved in digital businesses. He stressed the urgency of regulation to avoid international sanctions, as digital transactions remain illegal in Pakistan pending legislative changes, states the report.

Notably, a proposed Virtual Assets Ordinance, seeking to establish the Pakistan Virtual Assets Regulatory Authority (PVARA) with powers to license and monitor crypto and digital assets, is awaiting cabinet approval. Parliamentary committees are expected to review the draft soon, it has been learnt from the above-discussed report.

Meanwhile, the International Monetary Fund (IMF) also recently flagged Pakistan’s inability to address money laundering and corruption, warning of possible consequences if reforms are delayed.

Notably, Pakistan has a long record of non-compliance with FATF requirements.

First grey-listed in 2008 for terror financing, it has repeatedly faced global censure for failing to curb money laundering and its links to cross-border terrorism.

Between June 2018 and October 2022, Pakistan remained under FATF monitoring for over four years, suffering economic setbacks from reduced foreign investment, higher borrowing costs, and stricter scrutiny. It was removed only after completing an extensive action plan under international pressure.

New Delhi has, in fact, consistently argued that Pakistan uses terror financing as state policy and that FATF oversight is critical. Aurangzeb’s latest remarks only add weight to India’s long-standing stance that Pakistan remains a threat to global financial stability and security.