Pakistan has made only a limited progress on curbing terror financing: FATF

Pakistan has made only "limited progress" on curbing money laundering and terrorism financing, failing to show a proper understanding of the risks posed by Islamic State, Al Qaeda and others, the Paris-based Financial Action Task Force said.

The FATF said on Friday that it would continue to work with Pakistan, which had been hoping to get off a "grey list" of nations with inadequate controls over such activities.

"Given the limited progress on action plan items ... the FATF urges Pakistan to swiftly complete its action plan, particularly those with timelines of May 2019," the FATF said in a statement.

Pakistan's western allies have long pushed Islamabad to do more to curb militant groups on its soil.

Pakistan's inclusion on the list makes it harder for its government to access international markets at a time when the economy is stumbling. While there are no direct legal implications, it brings extra scrutiny from regulators and financial institutions that can chill trade and investment.

Pakistan needed to show sanctions were being applied in cases of money laundering and terrorism financing, demonstrate better cooperation between authorities identifying illegal money flows, and enhance support for prosecutors, among other measures, the FATF said.

India had pressed for Pakistan to be kept on the terrorism financing watchlist following an attack in disputed Kashmir that was claimed by a Pakistan-based militant group.