Financial Action Task Force
About:
- The global agency responsible for monitoring money laundering and terrorism financing is the Financial Action Task Force (FATF).
- The intergovernmental organization creates global norms with the intention of stopping these unlawful actions and the damage they do to society.
- The FATF seeks to create the required political will to bring about these types of national legislative and regulatory reforms in its capacity as a policy-making body.
- The FATF has created the FATF Recommendations, often known as FATF Standards, which guarantee a coordinated international response to stop terrorism, organized crime, and corruption.
- They aid law enforcement in pursuing the cash used by offenders engaged in human trafficking, the sale of illegal substances, and other crimes.
- The FATF also strives to halt the funding of nuclear and other WMDs.
FATF’s duties include:
- The FATF continually updates its rules to handle emerging threats, such as the regulation of virtual assets, which has grown as cryptocurrencies gain popularity. The FATF also analyses money laundering and terrorist financing methods.
- The FATF keeps non-compliant nations accountable by monitoring their implementation of the FATF Standards to ensure that it is complete and effective.
The Financial Action Task Force (FATF) has a long history:
- The G-7 Summit, which took place in Paris in 1989, established the Financial Action Task Force on Money Laundering in response to growing concerns about the practise.
- The G-7 Heads of State or Government and the President of the European Commission met to form the Task Force, which included representatives from the G-7 member states, the European Commission, and eight additional nations, after realising the threat to the banking system and financial institutions.
Members:
- The FATF increased its membership from its initial 16 to 28 members between 1991 and 1992. The FATF had 31 members when it was first established in 2000, and it now has 39.
- Following the 9/11 attacks in October 2001, the FATF broadened its scope to include initiatives to fight both money laundering and terrorism financing.
- It increased its efforts to stop the financing of the spread of weapons of mass destruction in April 2012.
The FATF’s goals are as follows:
- To provide guidelines and encourage the effective implementation of legal, administrative, and operational measures to combat money laundering, funding of terrorism, and other risks to the integrity of the global financial system.
Putting the FATF Recommendations into Practice:
- Examines methods for preventing money laundering and the funding of terrorism as well as countermeasures; encourages the adoption and application of the FATF recommendations around the world.
- The FATF Plenary, the decision-making body of the FATF, convenes three times year.
- The FATF now has 37 member countries and 2 regional bodies (the GCC and the European Commission), which represent the majority of the world’s main financial centres.
- Since 2010, India has belonged to the FATF.
- India is a member of the Eurasian Group and the Asia Pacific Group (APG), two of its regional allies (EAG).
FATF Lists:
Grey List:
- The FATF maintains a “grey list” of nations that are thought to assist money laundering and terrorism financing.
- This listing aims to alert the nation that it may be added to the blacklist.
- Greylisting signifies that FATF has intensified surveillance of a nation to assess how well it is implementing measures to combat money laundering and terrorism funding.
- The “enhanced surveillance list” is another name for the “grey list.”
Nations on the “grey list”:
- There are 23 nations listed on the FATF’s heightened monitoring list as of March 2022 (formally known as “jurisdictions with strategic deficiencies”):
- Yemen, South Sudan, South Sudan, Pakistan, Syria, Turkey, Myanmar, Philippines, and Uganda.
Black List:
- The blacklist is used to designate nations that are Non-Cooperative Countries or Territories (NCCTs).
- These nations aid in the financing of terrorism and the laundering of money.
- Every so often, the Financial Action Task Force updates the blacklist, adding or removing entries.
Process of taking off nations from the list:
- If a nation complies with the FATF’s recommendations, the Financial Action Task Force removes it from the list.
- Prior to removing Zimbabwe on the grey list, the FATF also removed Botswana and Mauritius.
Pakistan:
- Pakistan originally appeared on the list in 2008 but was later taken off. Then, from 2012 to 2015, it was once more included on the list.
- It has not been eliminated from the list since 2018.
- In June 2018, the FATF put Pakistan on its “Grey List,” which led to the release of the 27-point action plan.
- The action plan aims to stop the financing of terrorism and money laundering. The Asia Pacific Group (APG), a regional affiliate of the FATF, released a similar action plan in 2019.
Effects on Countries Economies’ when they are put into the Financial Action Task Forces lists:
- When the Financial Action Task Force (FATF) places a jurisdiction under increased monitoring, it indicates the nation has undertaken to address any identified strategic shortcomings quickly and within predetermined deadlines.
- This country is also subject to increased surveillance.
- Greylisting has a negative impact on the nation’s imports, exports, and remittances and restricts its ability to obtain foreign funding.
- FATF is linked with important financial organizations like the IMF and World Bank as observers, and countries that are on the grey list have trouble accessing international credit instruments.
