ISLAMABAD – Pakistan is facing renewed scrutiny over its compliance with international counter-terrorism financing standards ahead of the Financial Action Task Force’s (FATF) February plenary, with reports highlighting concerns about the continued operation and fundraising activities of designated militant groups within the country.

Observers are raising questions regarding Pakistan’s adherence to FATF recommendations, specifically recommendation five, which requires states to suppress the financing of terrorism, and recommendation six, related to targeted financial sanctions on suspected and designated terrorists.

These concerns emerge despite Pakistan’s removal from the FATF’s ‘under increased monitoring’ list, commonly known as the ‘grey list’, in October 2022. That decision followed the FATF’s assessment that Islamabad had taken sufficient steps to address deficiencies in its counter-terrorism financing framework. Pakistan had been placed under increased monitoring for the third time in a decade during the June 2018 plenary, deemed non-compliant or partially compliant on several of the organisation’s 40 recommendations.

A notable event prior to its delisting was the sentencing of Hafiz Saeed, founder and leader of Lashkar-e-Taiba (LeT), to 31 years in prison in 2022. Saeed, accused of orchestrating multiple mass casualty attacks including the 2008 Mumbai attacks, was convicted on terrorism financing charges rather than terrorism itself. His prolonged immunity in Pakistan had previously been a point of contention between Pakistan and the FATF.

Allegations of Operational Groups

Since October 2022, concerns have been voiced that Lashkar-e-Taiba (LeT), its offshoots including The Resistance Front (TRF), and other high-profile groups such as Jaish-e-Mohammad (JeM), continue to operate and fundraise within Pakistan. These allegations suggest a potential shortfall in disrupting terror financing networks, which some reports link to a resurgence of militancy in Jammu and Kashmir.

The Resistance Front (TRF), proscribed as a terrorist organisation in India since early 2023, is cited as an example. Reports attribute multiple attacks to TRF, including a week-long shootout with Indian security forces in September 2023 that resulted in the death of senior militant Uzair Khan. In June 2024, TRF claimed responsibility for an ambush on a bus carrying pilgrims in the Reasi district of Jammu and Kashmir, resulting in nine civilian fatalities and 41 injuries. Months later, TRF reportedly targeted workers in Ganderbal, killing seven civilians. These incidents, escalating in severity, culminated in an attack in Pahalgam in April 2025.

Evolving Financing Methods

The financial dependency of TRF on LeT is highlighted, with LeT reportedly continuing to evade sanctions enforcement in Pakistan. The FATF’s 2019 assessment noted Pakistan’s insufficient understanding of transnational terror financing risks, an issue that some argue persists.

New fundraising practices, including increased use of cryptocurrencies and digital wallets, are reportedly being employed by these groups. The decentralised nature of cryptocurrencies allows for evasion of detection and tracking through techniques such as transfer loops and fragmented deposits. Online-only banks and digital wallets, including Pakistani platforms like EasyPaisa and SadaPay, are also cited as popular avenues for terrorist groups, with privacy laws reportedly hindering state monitoring of certain digital wallets.

This situation, observers suggest, enables LeT to remain operational and receive financial support from donors, both domestically and internationally, thereby allowing offshoots like TRF to conduct attacks and contribute to regional instability.

JeM is also reported to have explored new funding avenues, allegedly exploiting the humanitarian situation in Gaza to establish sham charitable causes. Hammad Azhar, son of JeM leader Masood Azhar, is accused of raising funds under the guise of ‘Gaza Aid’, with these funds reportedly used to rebuild JeM facilities following military action by India in May 2024. The group has also reportedly appealed to sympathisers for funding ‘Complete Winter Survival Kits’ for the mountainous terrain of Jammu and Kashmir, aiding their recovery from military losses.

Concerns Over State Support Allegations

Allegations have also surfaced suggesting potential state tolerance or assistance in the revival of these entities. Following military strikes by India in May 2024 that destroyed several alleged terrorist training camps and headquarters in Pakistan, concerns have been raised about the potential reconstruction of these facilities.

For instance, reports suggest that the Markaz Syedna Bilal complex in Muzaffarabad, an alleged JeM training facility, is being rebuilt, with Federal Minister for Kashmir Affairs, Rana Muhammad Qasim, reportedly visiting the location in October 2025. Additionally, Hafiz Talha Saeed, son of imprisoned LeT chief Hafiz Saeed, has been reportedly observed addressing crowds in the presence of government ministers.

These developments have prompted questions about the timing of Pakistan’s removal from the FATF ‘grey list’. The continued operational capacity of domestic terrorist groups such as LeT and JeM, alongside allegations of state support, suggests to some that Pakistan may not have adequately addressed the terror financing networks within its borders. The forthcoming FATF plenary is seen as a critical opportunity to review these ongoing concerns.