India has increasingly used global financial and diplomatic platforms like FATF and IMF to highlight concerns regarding cross-border terrorism and terror financing. Critically examine India’s strategy in leveraging international institutions to counter Pakistan’s alleged involvement in terror-related activities. Also, discuss the challenges and implications of such a diplomatic approach.

Context

India’s decision to submit a dossier to the FATF outlining Pakistan’s alleged misuse of international financial aid and involvement in terror financing came amid renewed scrutiny of Pakistan’s grey-listing status and IMF funding review. This coincided with the aftermath of the Pahalgam terror attack and global discussions on anti-money laundering frameworks.

Introduction

Global institutions like the Financial Action Task Force (FATF) and International Monetary Fund (IMF) are increasingly being used by nation-states to influence behavior beyond traditional diplomacy. India’s strategy involves leveraging these platforms to isolate Pakistan diplomatically for its alleged support to terror networks.

Significance of India’s Strategy in Leveraging Global Institutions:

1. Global Financial Pressure: FATF’s grey-listing restricts a country’s access to international finance. India’s consistent inputs to FATF have contributed to Pakistan’s continued monitoring since 2018.

Example: FATF found deficiencies in Pakistan’s implementation of Recommendation 38 related to mutual legal assistance in freezing proceeds of crime.

• Diplomatic Messaging Through Multilateralism: By engaging with IMF and World Bank, India raises normative concerns about responsible financing.

Example: India objected to IMF’s $7 billion loan to Pakistan post-Pahalgam attack, arguing funds may be diverted to defense spending.

• Use of Data-Driven Dossiers: India’s dossier approach includes evidence of arms procurement and terror support using diverted international aid.

Example: Evidence presented to IMF showing a spike in arms imports after multilateral funding.

• Framing Terror Financing as a Global Risk: India internationalizes terrorism as a financial risk to global systems, garnering broader support.

Example: The demand for more stringent conditions on Pakistan under the FATF framework with backing from other FATF members.

• Strengthening India’s Soft Power: By upholding transparency and rule of law, India portrays itself as a responsible global stakeholder.

Challenges in Sustaining This Approach:

1. Geopolitical Limitations: Countries with strategic interests in Pakistan may dilute India’s efforts at forums like IMF and FATF.
2. Lack of Binding Enforcement: FATF recommendations are non-binding; compliance depends on political will.
3. Perception of Politicization: Critics may argue India is politicizing neutral financial platforms, which can reduce credibility.
4. Limited Leverage as a Non-Member: Pakistan is not a FATF member, and India relies on support from full FATF members for decisive action.

Way Forward for Strategic Diplomacy

1. Coalition Building: Work with like-minded countries to build consensus at FATF and IMF platforms.

Example: Support from nations affected by cross-border terrorism (e.g., France post-Paris attacks).

• Evidence-Based Advocacy: Use satellite imagery, financial intelligence, and independent audits for credible dossiers.
• Institutional Reforms at Global Level: Advocate for making FATF recommendations more enforceable and transparent.

Conclusion:

India’s calibrated use of FATF and IMF forums underscores a shift from reactive diplomacy to proactive global engagement. While challenges remain, this strategy enhances India’s credibility in global governance and highlights terrorism as a shared global threat rather than a bilateral issue.

‘+1’ Value Addition:

• Data: Pakistan was grey-listed from 2018 to 2022 by FATF; IMF approved $7 billion bailout for Pakistan in 2023.
• Legal Reference: FATF Recommendation 38 on freezing and seizing criminal proceeds.
• Quote: “Terrorism anywhere is a threat to peace everywhere.” – Kofi Annan
• Current Affairs Link: Post-Pahalgam attack dossier submission, IMF review of Pakistan funding in May 2024.

https://www.newindianexpress.com/nation/2025/May/23/india-to-push-for-pakistans-re-inclusion-in-fatfs-grey-list-raises-concerns-over-imf-loan-support

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