Within the clouds of regional turmoil, financial presence and networks that are operating to supply life force to extremist groupings such as Tehreek-Taliban Pakistan (TTP), are moving further and further beyond the grasp of surveillance and monitoring capability. Such groups have been using informal systems, especially the hawala network, as well a smuggling routes in transporting funds across porous borders, especially between Pakistan and Afghanistan. However, things are beginning to look different. Pakistan has not reacted to these threats by issuing condemnations only; it has taken a strategic approach and policy adjustments, intelligence gathering, and cyberspace observation to sever these financial arteries.
Pakistan completed fencing over 94% of the Durand Line to curb unregulated crossings.
Although occasionally international observers express concerns about routes of terrorist financing in the region, in most cases, it is ignored in the context of the amount of commitment devoted to this particular challenge in Pakistan itself. There has been a significant change within the past couple of years, since the concentrated efforts are not merely to engage in anti-terrorist warfare, but to cut sources of its financing within one of the least conspicuous but most pivotal areas of countering terrorism.
It has been difficult to trace Hawala, as it is an ancient system of money transfer that operates on a basis of trust instead of regulation. It is usually run with no records, and that is why it is used by people who want to get out of official banking investigations. Having realized this loophole, Pakistan has had a back-to-back operation against hawala and hundi networks. Among the highest-profile actions that happened in early 2023, when the Federal Investigation Agency (FIA) in collaboration with the State Bank of Pakistan raided many illegal currency changers in Karachi and Lahore and seized more than 350 million in unreported money, which was believed to be connected to hawala networks serving radical groups.
This crackdown was not episodic. Greater policy turning followed it. Those in authority start not only apprehending the people involved but also increasing the enforcement structures through the present regulation, including the Anti-Money Laundering Act (AMLA 2010) and the Anti-Terrorism Act (ATA 1997). More than 188 cases of terror financing have been recorded in 2022 alone, and numerous suspects of high profile, proven guilty under the anti-terrorism law. These steps have built institutional accountability and legal muscle around the issue.
Smuggling across the 2,400 km Pakistan-Afghanistan border has long been a persistent problem not just in terms of trade disruption, but in facilitating the movement of cash, weapons, and even manpower. A strategic countermeasure came in the form of the border fencing initiative. As late 2022, Pakistan completed fencing over 94% of the Durand Line, installing surveillance towers, checkpoints, and patrol roads. The fencing projects sparked for political friction and some resistance from tribal communities, but it helped reduce unregulated crossings, a significant step in stopping the smuggling of cash and goods often used for terror financing.
Over 188 terror financing cases were recorded in 2022 alone.
The Financial Action Force, in its October 2022 review, recognized these steps and Pakistan’s “significant progress “in improving its AML/CFT (Anti-Money Laundering Countering the Financing of Terrorism) regime. FATF had placed Pakistan on its grey list in 2018 due to strategic deficiencies, but following the fulfillment of 34 action items, Pakistan was removed from the list. Acknowledged that Pakistan has “strengthen the efficiency of its AML/ CFT regime and addressed technical deficiencies ahead of deadlines.”
Beyond external validation, domestic Reform continues. One major move has been the digitalization of financial monitoring. The Financial Monitoring Unit (FMU) now plays a central role in flagging suspicious transactions. In 2023, the FMU received and processed over 90,000 Suspicious Transaction Reports (STRs) from banks and financial Institutions.
Some of these reports led to the dismantling of shell companies operating under charitable fronts, eventually dismantled through intelligence-led operations. Parallel to enforcement, Pakistan tightened oversight on non-profit organizations (NPOs), which have sometimes been misused as financial fronts.
Through collaboration with the NADRA and the Ministry of Interior, NPO registration was digitalized and integrated with the SECP system. This made some NGOs unregistered, and unregistered so-called shadow NGOs such as Al-Rehmat Trust and Falah-e-Insaniat Foundation, both of which were previously flagged in international reports to be delisted and have their accounts frozen.
Another characteristic of the changing approach is cross-institutional cooperation. The meetings initiated by the National Counter Terrorism Authority (NACTA) held regularly among intelligence agencies, tax authorities, financial regulators, and police on the financial threats, may help in ensuring that the financial threats are dealt with in a timely and coordinated manner. On some occasions, NACTA-led intelligence led to the above localized funding cells in Khyber Pakhtunkhwa and Balochistan funneling cash through informal courier services.
Besides enforcement, Pakistan also made repatriation strategies. This was done under the reason that the government began to repatriate more than 800,000 Afghans living without papers in 2023 because of concerns about security issues and fiscal risks. As humanitarian voices protested, state agencies insisted on shutting down an informal network that had established itself on the borders, largely frequented as a transport of funds, goods, and information through unregulated tracks.
FATF acknowledged Pakistan’s “significant progress” in its AML/CFT regime in 2022.
The central role is being played by technology now. AI technologies are also under test with the assistance of the State Bank and the NADRA to identify financial anomalies. The algorithms are created to identify spikes on transactions close to the border region, repeated giving to anonymous groups, and informal monetary pattern that evades the established banking tracks. A pilot project involving two major Pakistani banks is already producing leads that are passed to the FMU and law enforcement for follow-up.
One example of new tools being used successfully came in February 2024, when an AI-monitored flag on multiple micro-transactions led to a probe that exposed a network operating under the guise of livestock trading between Quetta and Kandahar. Upon investigation, it was discovered that the funds were being redirected to a TTP-linked facilitator operating in Paktika province, Afghanistan.
These layered actions from fencing to financial surveillance, from local policing to global compliance, all underscore a national resolve. It’s not just about appeasing watchdogs. It is not only a question of pleasing watchdogs. It’s about long-term internal stability; Pakistan realizes that a terror group can only flourish beyond ideology. They are flourishing on anonymity, impunity, and liquidity. Stripping them of these resources is not just good policy, it’s an act of defense.
AI monitoring flagged micro-transactions linked to a TTP facilitator in Afghanistan.
The fight is far from over. But the tools, mindset, and commitment have evolved. FATF’s acknowledgement may have marked a turning point, but Pakistan’s real test is in sustaining and deepening these reforms. With every disrupted transaction, every export shell company, and every sealed broader crossing, the message is clear: the financial space for terrorism is shrinking, and that’s no accident. In contrast, many Afghan refugees in India have been waiting outside UNHCR offices for years, holding placards that speak not only of their need for shelter but of a deeper longing for dignity, a dignity systematically denied by policies rooted in indifference.
Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.
