Pakistan is a state-sponsor of terrorism, FATF lists the reasons

For the first time, the Financial Action Task Force (FATF) has publicly recognised state sponsorship of terrorism, reinforcing India’s long-standing charges that Pakistan facilitates and finances terrorist activities. The FATF’s July 2025 report flags concerns around state-backed terror operations and reveals how digital channels are being used to fund extremist violence

State sponsorship highlighted for the first time

In a landmark shift, the FATF’s latest “Comprehensive Update on Terrorist Financing Risks” explicitly calls out the role of states in financing and harbouring terrorist groups—marking a significant evolution in the global fight against terrorism

This move lends weight to India’s assertions that Pakistan’s military and intelligence apparatus continue to support organisations such as Lashkar-e-Taiba and Jaish-e-Mohammad, which New Delhi has repeatedly accused of fuelling terrorism across its borders

Digital financial platforms misused for terror financing

The FATF report also sounds the alarm on the abuse of e-commerce marketplaces and virtual payment platforms such as EPOMs, PayPal services and VPN networks—to fund terrorism. Operations like the 2019 Pulwama attack and the 2022 Gorakhnath Temple assault are cited as key examples where such digital tools were leveraged for acquiring explosives and wiring funds

It highlights broader vulnerabilities within online financial ecosystems used to fuel extremist networks.

India eyes FATF grey-list and international sanctions

Though FATF did not explicitly name Pakistan, its findings significantly bolster India’s diplomatic push to re-impose punitive measures on Islamabad including reinstatement on the grey-list, travel restrictions and opposing international lending

Indian policymakers hope FATF’s new stance will catalyse global support for tighter financial sanctions and monitoring.

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Pulwama, Gorakhnath Temple terror attacks funded through e-com sites, online payment services? FATF cites risks How terrorists use e-commerce, online payments to fund terror activities

In April 2025, India escalated its campaign at the World Bank and FATF, urging the two institutions to apply direct financial pressure on Pakistan to curb terror financing, striking a chord with the watchdog’s updated report.

Why this matter:

FATF’s acknowledgment marks a watershed moment in the fight against terrorism financing. By spotlighting state-sponsored terror, it sets a precedent for coordinated global action. Coupled with evidence of digital misuse, the report enhances India’s ability to press for multilateral sanctions against Pakistan and tighten controls over cyber-facilitated terror funding.