The New Geography of Illicit Flows
Money and contraband move together, and both increasingly travel by sea. From methamphetamine shipments off Pakistan’s Makran coast to the digital wallets flagged in the Financial Action Task Force’s (FATF) October 2025 warning, the pattern is unmistakable: the maritime and financial commons are converging. Criminal and extremist networks no longer need to move cash in duffel bags when the same proceeds can flow through crypto wallets and hawala gateways before being laundered into legitimate maritime commerce.
The oceans have become the physical highway of a financial architecture that remains largely invisible. How states regulate and prove transparency—not merely in banks but in ports, customs houses and shipping manifests—will now determine who truly governs the Indian Ocean.
FATF’s Second Warning to Pakistan
FATF’s latest report should be read as an early-warning system for maritime governance. Three years after Pakistan’s removal from the grey list, the watchdog has again cautioned that groups such as Jaish-e-Mohammad are exploiting fintech channels and “hidden transfers” to sustain transnational activity. The finding undermines the idea that compliance can be episodic. It also exposes a structural vulnerability: when states fail to close financial loopholes, they create conditions that enable the same networks to finance maritime trafficking and coastal corruption.
The parallel is visible at sea. In October 2025, Pakistan’s navy claimed a US $1 billion narcotics seizure under the Combined Maritime Forces—an operation lauded by CENTCOM but left undocumented. No boarding logs, prosecutions, or lab results were released. The pattern is identical to Pakistan’s financial behaviour: short bursts of performative enforcement, followed by opacity.
Why Financial Compliance Is a Maritime Issue
Maritime crime and money laundering are two sides of the same process. A meth shipment departing the Makran coast generates profits that must be recycled; those profits, in turn, fund the next run. Each dhow therefore represents a financial instrument as much as a logistical one. FATF’s concern about “hidden transfers” is, in maritime terms, concern about the next launch of stateless boats.
For the Indian Ocean’s stability, the distinction between financial transparency and maritime transparency is obsolete. Both demand traceability—of funds, of vessels, of cargo. Without it, enforcement becomes an endless cycle of seizures without deterrence.
India’s Integrated Model
India’s recent evolution offers a regional template. The same culture of documentation that underpins its Sea-to-Sentence prosecutions now informs its financial intelligence. The Enforcement Directorate, Financial Intelligence Unit–India, and Narcotics Control Bureau share real-time data on suspicious transactions linked to maritime cases. When the 2024 Porbandar mega-bust led to the discovery of foreign accounts, investigators used FATF’s Egmont Group channels to secure evidence abroad—proof that maritime enforcement and financial transparency can operate in tandem.
Interpol’s Silver Notice of 2025, tracing assets of a Dubai-based cartel financier identified from Indian case files, demonstrates how financial trails emerging from sea seizures can loop back into international enforcement. India’s message is consistent: compliance is not performance, it is procedure.
The Cost of Opaqueness
For states that rely on opacity, the strategic cost is rising. FATF’s “increased monitoring” status now directly influences sovereign credit ratings and access to IMF assistance. Pakistan’s renewed warning threatens not only its fiscal stability but its credibility as a maritime partner. Multinational task forces such as CMF or CTF-150 depend on data integrity; when a member nation’s figures cannot be independently verified, the entire coalition’s legitimacy suffers.
For private industry, too, the implications are profound. Insurers, logistics firms, and port operators increasingly factor AML/CFT compliance scores into their risk models. A reputation for opaque enforcement inflates freight rates and deters investment. In effect, transparency has become an economic weapon.
The Digital Wildcard
The next battleground is digital. FATF’s 2025 findings on Pakistan’s fintech vulnerabilities reflect a global problem: the rise of unregulated maritime fintech. Digital-wallet payments for crew wages, cargo fees, and bunkering services now move billions of dollars through semi-anonymous platforms. Without shared digital-identity standards, these channels are ripe for exploitation by traffickers and state-linked proxies.
India’s Reserve Bank of India (RBI) and Ministry of External Affairs have begun exploring a “trusted payments corridor” for legitimate maritime transactions—linking banks, ports, and shipping firms under blockchain-verified protocols. Such innovations, if multilateralised through the Indian Ocean Rim Association (IORA) or BIMSTEC, could pre-empt the misuse of fintech by illicit maritime actors.
A Call for Regional Convergence
The challenge ahead is political will. FATF’s framework already provides a blueprint for financial transparency; what the Indian Ocean lacks is a corresponding maritime mechanism. India has quietly proposed within IORA a Regional Maritime Transparency Charter that would align evidence-handling, vessel registration, and financial reporting standards. If adopted, it could do for maritime governance what FATF did for global finance—create shared rules, shared audits, and shared accountability.
For smaller island states, participation would mean access to India’s surveillance data, forensic assistance, and legal training. For larger coastal nations, it would mean harmonised prosecution standards that close jurisdictional gaps. In a region where 70 per cent of narcotics cases collapse for lack of evidence, such a charter could turn collective weakness into collective deterrence.
Beyond Compliance: Toward Credibility
True credibility is cumulative. It is built when every seizure, every financial audit, and every court verdict forms a consistent pattern of behaviour. India’s evolution from episodic enforcement to systematised governance shows how that credibility can be achieved. Pakistan’s relapse into FATF scrutiny shows how quickly it can be lost.
The lesson is universal. The future of maritime security will be written not in tonnage seized or ships deployed, but in the transparency of data, finance, and evidence. The oceans are the last unregulated global commons; they will soon demand the same financial hygiene that FATF insists on ashore.
A Strategic Reflection
As a naval officer, I have watched how lawlessness at sea mirrors disorder on land. The vessels that run drugs or contraband rarely act alone—they are financed, insured, and politically protected. The only lasting countermeasure is transparency that travels faster than corruption. FATF’s warning to Pakistan is therefore more than a financial rebuke; it is a signal that the age of unaccountable maritime governance is ending.
The next great contest in the Indian Ocean will not be between fleets but between systems of proof. Those who can document their compliance—financial and maritime—will command both trust and trade. Those who cannot will drift further into isolation, grey-listed in every sense of the term.