Terrorism Financing and FATF’s Special Recommendations: Global Standards and the Case of Pakistan

Abstract

Terrorism financing is a critical challenge that sustains and empowers terrorist organizations, threatening global security and stability. This paper critically examines the global standards established by the Financial Action Task Force (FATF) to combat terrorism financing, focusing on its nine Special Recommendations and their implementation in national legal frameworks. Using Pakistan as a case study, the paper analyzes the country’s efforts to align its anti-money laundering and counter-terrorism financing (AML/CFT) laws with international norms, highlighting both progress and persistent deficiencies. Pakistan’s repeated inclusion on the FATF grey list underscores the complexities and challenges it faces in regulating informal financial channels, enforcing United Nations Security Council resolutions, and conducting effective investigations and prosecutions. The study identifies key legislative and regulatory reforms undertaken by Pakistan, including amendments to the Anti-Terrorism Act, Anti-Money Laundering Act, and various regulatory guidelines issued by the State Bank of Pakistan and the Securities and Exchange Commission. It also discusses the role of the Asia Pacific Group (APG) in monitoring compliance and the geopolitical dynamics influencing FATF’s listing mechanisms. The paper concludes that while Pakistan has made significant strides in strengthening its legal and institutional frameworks, critical gaps remain in implementation, enforcement, and inter-agency coordination. Furthermore, the study highlights concerns about the politicization of FATF’s processes, particularly the influence of dominant nations in grey and black listing decisions. Recommendations include further legislative harmonization, capacity building for law enforcement agencies, and enhanced international cooperation to ensure a more equitable and effective global counter-terrorism financing regime.