India to Urge FATF to Re-List Pakistan on Grey List, Opposes World Bank Funding Amid Terror Concerns

New Delhi, May 23, 2025 — In a significant diplomatic move, India will submit a formal dossier to the Financial Action Task Force (FATF), seeking the re-inclusion of Pakistan in its “grey list” over Islamabad’s alleged failure to curb terror financing and implement key reforms. This comes in the wake of the deadly Pahalgam terror attack on April 22, which claimed 26 lives and intensified international scrutiny of Pakistan’s role in cross-border terrorism.

According to Indian officials, Pakistan has not fulfilled multiple FATF commitments, including enacting the Anti-Terrorism (Amendment) Bill, 2020. India also accused Pakistan of misusing international funds for military purposes and shielding proscribed terror outfits such as Lashkar-e-Taiba and Jaish-e-Mohammed. The FATF had removed Pakistan from its grey list in 2022 after it pledged to tighten controls on money laundering and terror funding. India argues that recent developments warrant Pakistan’s return to the watchlist.

In addition to FATF action, New Delhi plans to challenge proposed financial aid to Pakistan by international financial institutions. India is reportedly preparing to oppose a World Bank loan proposal amounting to nearly $20 billion to Islamabad, citing concerns over potential diversion of funds to support military operations and extremist elements.

A senior Indian official told the media that FATF’s upcoming plenary session in June would be crucial. “Pakistan’s duplicity has been exposed. Terror financing continues under the radar, and we have enough evidence to show that corrective measures are merely cosmetic,” the source said.

India’s diplomatic campaign follows Operation Sindoor, launched on May 7 in response to the Pahalgam attack. Indian armed forces carried out precision strikes on terrorist infrastructure across Pakistan and Pakistan-occupied Kashmir. In the aftermath, India has sought to isolate Pakistan globally, both diplomatically and economically.

The FATF grey list includes countries with strategic deficiencies in their anti-money laundering and counter-terror financing mechanisms. Being listed severely restricts a nation’s ability to access global financial markets and foreign aid. India’s move is expected to find support from several countries, particularly in light of increased global emphasis on counterterrorism.

Meanwhile, Indian officials are also lobbying against continued IMF support to Pakistan, arguing that Islamabad’s economic practices and failure to comply with international norms present risks to regional stability.