India seeks Pakistan's return to FATF grey list, raises concerns over misuse of $7 bn IMF package: Sources

India is considering significant punitive financial action against Pakistan following the Pahalgam terror attack. A key part of India's response involves advocating for Pakistan's re-entry onto the Financial Action Task Force (FATF) grey list. If Pakistan is reinstated on the grey list, the country would face increased scrutiny and financial limitations, particularly affecting its access to foreign investments, India Today reported, citing sources.

This move could lead to heightened monitoring of its financial transactions and capital inflows. The FATF plenary, comprising 40 member states and meeting thrice annually, is responsible for assessing member states' compliance with anti-money laundering and counter-terrorism financing standards.al India plans to engage with key FATF members to garner support for this initiative, especially after Pakistan's removal from the list in October 2022.

Besides this, India is also planning to raise concerns about the potential misuse of a $7 billion aid package provided to Pakistan by the International Monetary Fund (IMF) in July 2024, fearing funds may be diverted for terror-related activities.

In addition to financial actions, India has downgraded diplomatic relations, suspended the Indus Waters Treaty, and closed the Integrated Check Post at the Attari-Wagah border.

Visa services for Pakistani nationals have been cancelled, and India's airspace is now closed to Pakistani flights. Digital measures include banning 16 Pakistani YouTube channels and blocking the Instagram accounts of Pakistani celebrities.

The retaliatory actions stem from the deadly Pahalgam terror attack, involving Pakistan-based Lashkar terrorists. In response, Pakistan has announced its diplomatic countermeasures, including suspending trade with India and hinting at putting the Simla Agreement in "abeyance." Such actions reflect escalating tensions and the complexities of managing bilateral relations amidst security concerns.

On April 22, a total of 26 people, mostly tourists, lost their lives after 5-6 terrorists opened fire in the Baisaran Valley of Jammu and Kashmir's Pahalgam. The Resistance Front (TRF), a proxy of the Lashkar-e-Taiba (LeT) took responsibility for the attack. 

These developments underscore the broader geopolitical dynamics at play, with India leveraging diplomatic and financial instruments to address security threats. The upcoming FATF plenary will be a critical juncture in determining the international community's stance on Pakistan's financial practices and its implications for regional stability.