In February 2026, beneath the ornate dome of Mexico City’s Palacio de Bellas Artes, global financial watchdogs will gather for the Financial Action Task Force (FATF) Plenary and Working Group meetings.
Far from the violence that continues to afflict South Asia, Pakistan will once again present itself as a responsible counterterrorism partner—armed with compliance reports, legislative amendments and assurances of reform.
On paper, its 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. This widening gap between form and function is precisely what Western policymakers must confront as FATF prepares its next round of assessments.
Pakistan’s removal from the FATF grey list in 2022 was widely portrayed as a success story. Officials cited new anti-money laundering laws, terrorist-financing prosecutions and institutional reforms as evidence of a genuine course correction. FATF itself acknowledged technical improvements, but it also stressed that effectiveness—not legislation—remains the ultimate benchmark. That distinction has proven decisive.
Open-source reporting and financial intelligence patterns indicate that UN-designated terrorist organizations such as Jaish-e-Mohammad (JeM) and Lashkar-e-Taiba (LeT) have not been dismantled but modernized.
Recent documentation shows how these groups exploit humanitarian crises, including the Gaza conflict, to channel funds into militant activities. Under the guise of aid appeals and mosque reconstruction, figures such as Hammad Azhar—the son of JeM leader Masood Azhar—and Azhar’s brother, Talha al-Saif, have reportedly coordinated fundraising campaigns using digital wallets like EasyPaisa, SadaPay and JazzCash.
These efforts aggregate micro-donations and cryptocurrency transfers, often through fragmented wallet structures and “chain-hopping” techniques designed to evade detection.
Funds raised through such channels have allegedly supported militant infrastructure, including the construction of more than 300 mosques and the rebuilding of sites historically linked to LeT training facilities damaged during India’s 2025 Operation Sindoor.
This is not mere opportunism. While Pakistan’s legal framework may align with FATF’s 40 recommendations, operational enforcement remains uneven and selective. Sanctioned individuals such as Hafiz Talha Saeed have appeared at public rallies in Lahore under police protection, issuing threats against Indian Prime Minister Narendra Modi.
In 2025, senior Pakistani legislator Rana Muhammad Qasim Noon reportedly visited militant-linked reconstruction sites alongside local officials—an episode that underscored the blurred lines between state actors and extremist networks.
Recruitment drives disguised as religious gatherings continue, often coordinated through Jamiat Ulema-e-Islam networks. At facilities such as Markaz Shohada-e-Islam in Khyber Pakhtunkhwa, JeM commander Masood Ilyas Kashmiri has delivered speeches praising Osama bin Laden and al Qaeda—openly and without consequence.
Taken together, these cases reflect a long-standing “management” model of extremism. Militant groups are not dismantled but repackaged, 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 approach exports instability while shielding militancy behind the façade of democratic participation.
Why Mexico City matters
The February 2026 FATF meetings come at a time when Pakistan’s engagement with the United States and Europe is deepening even as its internal security situation deteriorates. Militant violence has surged, driven by attacks from 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. Intelligence sharing, access agreements and economic partnerships do not necessarily signal aligned counterterrorism priorities.
Pakistan’s strategic incentives continue to reward selective tolerance of militant actors, particularly those oriented toward India. FATF’s effectiveness framework exists precisely to test whether states are willing to disrupt these incentives—not simply conceal them behind procedural compliance.
FATF’s 2025 Comprehensive Update on Terrorist Financing Risks underscores this urgency, highlighting a sharp rise in hybrid digital methods as Pakistan-linked entities shift from traditional banking channels to fintech platforms.
Although Pakistan exited the grey list after four years of economic pressure, FATF President Elisa de Anda Madrazo warned in October 2025 that the removal was “not bulletproof,” citing unregulated digital transactions as a persistent vulnerability.
Mexico City should therefore mark a turning point. US and EU delegations must press for outcome-based evaluations focused on sustained investigations, verifiable asset seizures and the dismantling of facilitation networks. Particular scrutiny should be directed at digital payment systems, informal charities and micro-donation models that exploit regulatory blind spots.
Western governments must also coordinate more closely to track cross-border financial flows linked to high-risk jurisdictions, ensuring that Pakistan’s reforms translate into measurable disruption rather than rhetorical reassurance.
Pakistan will argue that renewed scrutiny risks destabilising a fragile state. That argument has been persuasive before—and it has failed before. Stability built on tolerated militancy is not stability; it is deferred risk.
Western engagement should therefore rest on two imperatives. First, international partners must move beyond accepting legislative reform and condition high-level diplomatic, security and economic engagement on verifiable enforcement outcomes—sustained prosecutions, asset freezes targeting designated individuals, and the disruption of digital fundraising networks linked to groups such as JeM and LeT.
Second, Washington and Brussels should treat Pakistan-linked terrorist financing as a transnational financial integrity threat, not merely 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 are increasingly exploiting new financial technologies; Western governments must respond with deeper typology sharing, higher due-diligence thresholds for high-risk transactions and protections for journalists and activists targeted by transnational repression.
In Mexico City, Pakistan will speak the language of compliance and reform. The real test lies beyond the conference halls: 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.
The next FATF test: Can the West demand results from Pakistan?
In February 2026, beneath the ornate dome of Mexico City’s Palacio de Bellas Artes, global financial watchdogs will gather for the Financial Action Task Force (FATF) Plenary and Working Group meetings.
Far from the violence that continues to afflict South Asia, Pakistan will once again present itself as a responsible counterterrorism partner—armed with compliance reports, legislative amendments and assurances of reform.
On paper, its 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. This 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 cited new anti-money laundering laws, terrorist-financing prosecutions and institutional reforms as evidence of a genuine course correction. FATF itself acknowledged technical improvements, but it also stressed that effectiveness—not legislation—remains the ultimate benchmark. That distinction has proven decisive.
Open-source reporting and financial intelligence patterns indicate that UN-designated terrorist organizations such as Jaish-e-Mohammad (JeM) and Lashkar-e-Taiba (LeT) have not been dismantled but modernized.
Recent documentation shows how these groups exploit humanitarian crises, including the Gaza conflict, to channel funds into militant activities. Under the guise of aid appeals and mosque reconstruction, figures such as Hammad Azhar—the son of JeM leader Masood Azhar—and Azhar’s brother, Talha al-Saif, have reportedly coordinated fundraising campaigns using digital wallets like EasyPaisa, SadaPay and JazzCash.
These efforts aggregate micro-donations and cryptocurrency transfers, often through fragmented wallet structures and “chain-hopping” techniques designed to evade detection.
Funds raised through such channels have allegedly supported militant infrastructure, including the construction of more than 300 mosques and the rebuilding of sites historically linked to LeT training facilities damaged during India’s 2025 Operation Sindoor.
This is not mere opportunism. While Pakistan’s legal framework may align with FATF’s 40 recommendations, operational enforcement remains uneven and selective. Sanctioned individuals such as Hafiz Talha Saeed have appeared at public rallies in Lahore under police protection, issuing threats against Indian Prime Minister Narendra Modi.
In 2025, senior Pakistani legislator Rana Muhammad Qasim Noon reportedly visited militant-linked reconstruction sites alongside local officials—an episode that underscored the blurred lines between state actors and extremist networks.
Recruitment drives disguised as religious gatherings continue, often coordinated through Jamiat Ulema-e-Islam networks. At facilities such as Markaz Shohada-e-Islam in Khyber Pakhtunkhwa, JeM commander Masood Ilyas Kashmiri has delivered speeches praising Osama bin Laden and al Qaeda—openly and without consequence.
Taken together, these cases reflect a long-standing “management” model of extremism. Militant groups are not dismantled but repackaged, 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 approach exports instability while shielding militancy behind the façade of democratic participation.
Why Mexico City matters
The February 2026 FATF meetings come at a time when Pakistan’s engagement with the United States and Europe is deepening even as its internal security situation deteriorates. Militant violence has surged, driven by attacks from 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. Intelligence sharing, access agreements and economic partnerships do not necessarily signal aligned counterterrorism priorities.
Pakistan’s strategic incentives continue to reward selective tolerance of militant actors, particularly those oriented toward India. FATF’s effectiveness framework exists precisely to test whether states are willing to disrupt these incentives—not simply conceal them behind procedural compliance.
FATF’s 2025 Comprehensive Update on Terrorist Financing Risks underscores this urgency, highlighting a sharp rise in hybrid digital methods as Pakistan-linked entities shift from traditional banking channels to fintech platforms. Although Pakistan exited the grey list after four years of economic pressure, FATF President Elisa de Anda Madrazo warned in October 2025 that the removal was “not bulletproof,” citing unregulated digital transactions as a persistent vulnerability.
Mexico City should therefore mark a turning point. US and EU delegations must press for outcome-based evaluations focused on sustained investigations, verifiable asset seizures and the dismantling of facilitation networks.
Particular scrutiny should be directed at digital payment systems, informal charities and micro-donation models that exploit regulatory blind spots.
Western governments must also coordinate more closely to track cross-border financial flows linked to high-risk jurisdictions, ensuring that Pakistan’s reforms translate into measurable disruption rather than rhetorical reassurance.
Pakistan will argue that renewed scrutiny risks destabilising a fragile state. That argument has been persuasive before—and it has failed before. Stability built on tolerated militancy is not stability; it is deferred risk.
Western engagement should therefore rest on two imperatives. First, international partners must move beyond accepting legislative reform and condition high-level diplomatic, security and economic engagement on verifiable enforcement outcomes—sustained prosecutions, asset freezes targeting designated individuals, and the disruption of digital fundraising networks linked to groups such as JeM and LeT.
Second, Washington and Brussels should treat Pakistan-linked terrorist financing as a transnational financial integrity threat, not merely 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 are increasingly exploiting new financial technologies; Western governments must respond with deeper typology sharing, higher due-diligence thresholds for high-risk transactions and protections for journalists and activists targeted by transnational repression.
In Mexico City, Pakistan will speak the language of compliance and reform. The real test lies beyond the conference halls: 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.
