OPINION — In the shadow of Mexico City's historic Palacio de Bellas Artes, global financial watchdogs will convene in February 2026 for the Financial Action Task Force (FATF) Plenary and Working Group Meetings. In conference rooms far removed from South Asia’s violence, Pakistan will once again present itself as a responsible counterterrorism partner, armed with compliance reports, legislative amendments, and assurances of reform. On paper, Pakistan’s financial regulations increasingly resemble those of many developing democracies. On the ground, however, the networks that finance and enable terrorism continue to adapt and operate with troubling resilience. The widening gap between form and function is precisely what Western policymakers must confront as FATF prepares its next round of assessments.
The Compliance Illusion
Pakistan’s removal from the FATF grey list in 2022 was widely portrayed as a success story. Officials pointed to new anti-money laundering laws, terrorist financing prosecutions, and institutional reforms as evidence of a course correction. FATF itself acknowledged technical improvements, yet it also emphasized that effectiveness, not legislation, remains the ultimate benchmark. That distinction has proven critical.
Open-source reporting and documented financial intelligence patterns suggest that terrorist organizations such as Jaish-e-Mohammad (JeM) and Lashkar-e-Taiba (LeT) have not been dismantled but rather modernized. Recent documents reveal how these UN-designated outfits exploit humanitarian crises, such as the Gaza conflict, to funnel funds into terror activities. Under the guise of aid appeals and mosque reconstructions, figures like Hammad Azhar, son of JeM leader Masood Azhar, and Azhar’s brother Talha al-Saif orchestrate campaigns using digital wallets like EasyPaisa, SadaPay, and JazzCash, aggregating micro-donations and cryptocurrencies to evade detection. These efforts aggregate micro-donations and cryptocurrency transfers, often employing fragmented wallet structures and chain-hopping across platforms to avoid detection. Funds have reportedly supported militant infrastructure, including the establishment of more than 300 Mosques and the reconstruction of locations historically linked to LeT training facilities damaged during India’s 2025 Operation Sindoor.
This pattern reflects more than opportunism. Pakistan’s legal framework may align with FATF’s 40 recommendations on paper, but operational enforcement remains deeply inconsistent. Sanctioned individuals such as Hafiz Talha Saeed have led public rallies in Lahore under police protection, issuing threats against Indian Prime Minister Narendra Modi. In 2025, senior Pakistani legislature Rana Muhammad Qasim Noon reportedly visited militant-affiliated reconstruction sites alongside local officials, revealing overt collaboration between state and non-state actors. Recruitment drives disguised as religious gatherings, often coordinated with Jamiat Ulema-e-Islam networks, have featured speeches praising Osama bin Laden and al Qaeda, delivered by JeM commander Masood Ilyas Kashmiri at facilities such as Markaz Shohada-e-Islam in Khyber Pakhtunkhwa.
Together, these cases point to a long-standing “management” model of extremism. Militant groups are not dismantled but rebranded, with political fronts such as the Pakistan Markazi Muslim League contesting elections while violence is normalized as a political instrument. As Greece-based policy analyst Dimitra Staikou has argued, this model exports instability through regional alignments and shields militancy behind formal democratic processes.
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Why Mexico City Matters
The February 2026 FATF meetings come at a moment when Pakistan’s engagement with the United States and Europe is deepening even as its internal security situation deteriorates. Militant violence has surged significantly, driven by attacks from the Tehrik-e-Taliban Pakistan and Baloch insurgent groups. Rather than prompting a clean break with all forms of militancy, this instability risks reinforcing the proxy logic that FATF scrutiny is meant to dismantle. For Western policymakers, the danger lies in conflating cooperation with convergence in security priorities. Intelligence sharing, access agreements, or economic partnerships do not necessarily reflect aligned counterterrorism priorities. As I argued previously in The Milli Chronicle, Pakistan’s strategic incentives continue to reward selective tolerance of militant actors, particularly those oriented toward India. FATF’s effectiveness framework exists to test whether states are willing to disrupt these incentives, not simply mask them with procedural compliance.
FATF’s 2025 Comprehensive Update on Terrorist Financing Risks underscores the urgency. The report highlights a marked increase in hybrid digital methods, consistent with Pakistan-linked entities shifting from banks to fintech platforms to evade oversight. Although Pakistan exited the grey list in 2022 after four years of economic strain, FATF President Elisa de Anda Madrazo warned in October 2025 that the removal was “not bulletproof,” citing unregulated digital transactions as a continuing vulnerability.
Mexico City should therefore serve as a turning point. US and EU delegations should press for outcome-based evaluations focused on sustained investigations, verifiable asset seizures, and the dismantling of facilitation networks. Particular scrutiny must be directed toward digital payment systems, informal charities, and micro-donation models that exploit regulatory blind spots. Western governments should also coordinate more closely to monitor cross-border flows linked to high-risk jurisdictions, ensuring that Pakistan’s reforms translate into measurable disruption rather than rhetorical reassurance.
Conclusion: Choosing Substance Over Stability Theater
Pakistan will argue that renewed scrutiny risks destabilizing a fragile state. That argument has been persuasive before, and it has failed before. Stability built on tolerated militancy is not stability at all; it is deferred risk. Western capitals should therefore anchor their engagement around two imperatives.
First, international partners should move beyond accepting legislative reforms and instead condition high-level diplomatic, security, and economic engagement with Pakistan on verifiable enforcement outcomes. This means tying cooperation to demonstrable actions such as sustained terrorist-financing prosecutions, asset freezes against UN- and US-designated individuals, and the disruption of digital fundraising networks linked to groups like JeM and LeT.
Second, Washington and Brussels should treat Pakistan-linked terrorist financing as a transnational financial integrity threat, not a regional security issue. This requires enhanced monitoring of fintech platforms, mobile wallets, charities, and micro-donation systems used by diaspora-linked networks in Europe and North America. FATF has repeatedly warned that terrorist groups increasingly exploit digital payments and new financial technologies to evade traditional controls. The EU and US should expand joint typology sharing, require higher due-diligence thresholds for transactions linked to high-risk jurisdictions, and protect activists and journalists targeted by transnational repression tied to Pakistan’s security apparatus.
In Mexico City, Pakistan will speak in the language of compliance and reform. Beyond the conference halls, the true test will be whether the networks that finance violence are finally dismantled or quietly allowed to endure. If Western governments choose substance over symbolism, this moment can mark a turning point. If not, the paperwork will pass, and the risks will return—more adaptive, more opaque, and more dangerous than before.
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