FATF issues warning to Pakistan, signaling that its exit from the grey list in October 2022 does not provide immunity from global scrutiny. The Financial Action Task Force has raised alarms over the misuse of digital financial platforms, emphasizing that cross-border crypto transactions linked to terrorist groups like Jaish-e-Mohammed (JeM) are under intense investigation. Intelligence reports indicate that these groups exploit Pakistani fintech platforms such as EasyPaisa and SadaPay to move illicit funds, bypassing conventional banking regulations.
A FATF official remarked, “Grey list exit is not immunity. Pakistan must tighten its crypto regulations and monitor virtual assets to prevent misuse by terrorist networks.” This underscores Pakistan’s ongoing vulnerabilities in financial oversight and its global accountability to curb illicit fund flows.
Terror Groups Exploit Digital Wallets for Funding
Recent reports reveal that terror financing in Pakistan increasingly relies on digital wallets and virtual assets. Platforms such as EasyPaisa and SadaPay have allegedly been exploited to move funds both domestically and internationally.
Analysts warn that these channels enable groups like Jaish-e-Mohammed to operate a parallel financial network, making detection by authorities extremely difficult. The use of cryptocurrency adds another layer of anonymity, allowing cross-border transactions to go largely untraceable.
Financial experts also highlight that unless Pakistan strengthens monitoring mechanisms, these digital channels could increasingly become a preferred tool for terror funding, posing serious risks to regional security and international financial stability.
Pakistan’s Regulatory Response: PVARA
In response to international pressure, Pakistan established the Pakistan Virtual Assets Regulatory Authority (PVARA) in July 2025. PVARA is tasked with licensing, supervising, and regulating all virtual asset service providers. Its goal is to strengthen digital asset oversight, ensure compliance with anti-money laundering (AML) standards, and prevent terrorist financing through crypto channels.
A senior Pakistani official said, “PVARA represents a major step toward aligning Pakistan’s crypto regulations with international standards. It will enhance transparency and accountability in virtual asset operations.”
Experts emphasize that PVARA’s effectiveness will depend on rigorous enforcement, regular audits, and strict penalties for non-compliance. Additionally, coordination with international watchdogs and real-time monitoring of suspicious transactions will be crucial to ensure Pakistan fully addresses the FATF’s concerns and prevents further misuse of virtual assets by illicit actors.
Geopolitical and Global Implications
The FATF warning Pakistan carries significant geopolitical weight. India and other regional partners have expressed concern over terror financing originating from Pakistan, and FATF’s scrutiny is closely watched by the international community.
Analysts warn that unchecked digital asset misuse could fuel cross-border terror attacks, destabilize regional security, and affect Pakistan’s diplomatic relations. The warning also signals that global financial watchdogs will closely monitor Pakistan’s progress in enforcing crypto regulations and virtual asset oversight.
Experts further note that failure to act decisively could impact Pakistan’s access to international investments and strain its economic relations with key allies, making regulatory reforms and compliance a matter of both security and economic survival.
International Remarks and Expert Insights
FATF officials emphasized that Pakistan’s regulatory framework must comply with global anti-money laundering (AML) and counter-terror financing (CFT) standards. Experts argue that the rise of crypto channels demands international cooperation to monitor cross-border crypto transactions effectively.
Analysts note that PVARA is a positive development, but Pakistan must demonstrate effective enforcement to gain credibility in the global financial system. Failure to act decisively could invite further sanctions and pressure from international financial institutions.
Pakistan at a Critical Crossroads
The FATF warning marks a critical juncture for Pakistan’s financial system. While PVARA provides a framework to strengthen crypto oversight, Pakistan must enhance monitoring of cross-border crypto transactions, enforce AML/CFT standards, and curb terrorist financing through digital assets.
The coming months will determine whether Pakistan can restore confidence in its financial integrity. Global stakeholders remain vigilant, and Pakistan’s regulatory actions will shape its international standing and influence regional security dynamics.
