Why Terror Financing Remains a Challenge in Pakistan

Recent reporting has brought renewed attention to the challenges Pakistan continues to face in tackling terror financing—particularly during religious holidays like Eid-ul-Fitr, when charitable giving is at its peak. Despite policy reforms and international oversight, proscribed groups such as Tehreek-e-Taliban Pakistan (TTP), Jaish-e-Mohammed (JeM), and Jamaat-ud-Dawa (JuD) have reportedly continued to raise funds across parts of the country.

What makes the situation particularly complex is how these fundraising efforts often blend into everyday social and religious practices. During Eid, when zakat and donations are widely encouraged, distinguishing between genuine charity and funding for extremist groups becomes a difficult task for both citizens and authorities.

According to some reports, the presence of these activities in areas like Khyber Pakhtunkhwa, Pakistan-administered Kashmir, and Islamabad shows how far-reaching and organized some of these networks remain. This raises questions about the enforcement capacity of local and federal agencies—and whether existing laws and regulations are enough to monitor and curb these operations.

At the leadership level, recent remarks by Pakistan’s Army Chief, Field Marshal Asim Munir, during a speech at the Naval Academy have sparked debate. While he framed certain regional conflicts—such as Kashmir—as “legitimate struggles,” some analysts worry that such rhetoric could blur the line between political support and tolerance for groups involved in violence. Though not a direct endorsement, these kinds of statements can complicate how Pakistan’s counterterrorism priorities are viewed at home and abroad.

There’s also the human side of this issue. Many of the banned groups continue to run welfare programs—schools, hospitals, and food distribution efforts—that fill real gaps in public services. In low-income communities, this creates loyalty and reliance, making it even harder for law enforcement to shut down these networks without harming people who depend on them for basic needs.

Internationally, Pakistan has made progress—particularly since being removed from the FATF grey list in October 2022. Still, watchdogs like the Financial Action Task Force (FATF) have highlighted the need for stronger oversight of how non-profit and charitable organizations operate. FATF Recommendation 8, for example, specifically calls on countries to prevent extremist groups from misusing the non-profit sector.

The challenge goes beyond paperwork or technical compliance. It’s about building systems and institutions that can spot and stop dangerous financial flows—without undermining legitimate civil society. Groups like JuD and JeM have been under UN sanctions, yet reports of continued fundraising suggest enforcement on the ground hasn’t fully caught up.

The ripple effects of this problem extend well beyond Pakistan’s borders. When funds are raised and moved through informal networks like hawala, they can end up financing activities not just in Pakistan, but in Kashmir, Afghanistan, or even further afield. These financial pipelines are difficult to trace and disrupt, especially when they operate outside of formal banking systems.

That’s why international support matters—but so does local willpower. Diplomats, aid organizations, and watchdog groups can offer tools and pressure, but lasting change will depend on Pakistan’s own commitment to reform. That means not just passing laws, but enforcing them consistently—even when it’s politically or socially inconvenient.

Addressing this issue won’t be easy. It will require Pakistan to build stronger financial intelligence, improve coordination between civilian and military agencies, and invest in community-based approaches that offer alternatives to extremist-run services. Just as importantly, public messaging from leadership must be clear and unified: support for violent extremism—whether direct or indirect—should have no place in national policy.

As Pakistan works to strengthen its financial systems and meet international obligations, the global community must also recognize the complexities involved. With the right mix of support, accountability, and long-term engagement, progress is possible—but it will take time, trust, and a shared commitment to peace and security.

Sources Referenced:

• Dawn News – March 2025
• The Express Tribune – April 2025
• FATF – Best Practices Paper on Non-Profit Abuse
• LiveMint – FATF on Pakistan’s Risk Factors

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