FATF - INTERNATIONAL RELATIONS
News:
Central agencies gear up for FATF mutual evaluations
What's in the news?
● Government
agencies have expedited efforts to further strengthen the anti-money laundering
and counter-terror financing frameworks in view of the coming Financial Action
Task Force (FATF) assessment of India in the fourth round of mutual evaluations
expected later this year.
Key takeaways:
● The
government has also organized a series of conferences focused on combating
terror financing, including the United
Nations Security Council Counter-Terrorism Committee special conference in
India.
● The
‘No Money For Terror’ conference
where India proposed to host its headquarters.
● The
UNSC briefing on challenges to the
global counter-terrorism regime at the UN in New York.
What is FATF?
● The
Financial Action Task Force (FATF) is the global
money laundering and terrorist financing watchdog.
● The
inter-governmental body sets international standards that aim to prevent these
illegal activities and the harm they cause to society.
● As
a policy-making body, the FATF works to generate the necessary political will
to bring about national legislative and regulatory reforms in these areas.
● It
was established in 1989 during the G7
Summit in Paris.
● Its
Secretariat is located at the Organization for Economic Cooperation and
Development (OECD) headquarters in Paris.
Functions:
● The
FATF has developed the FATF
Recommendations, or FATF Standards, which ensure a coordinated global
response to prevent organized crime, corruption and terrorism.
● They
help authorities go after the money of criminals dealing with illegal drugs,
human trafficking, and other crimes.
● The
FATF also works to stop funding for weapons of mass destruction.
● It
also assesses the strength of a country’s anti-money laundering and anti-terror
financing frameworks.
● It does not go by
individual cases.
Members:
● FATF
currently has 39 members including
two regional organizations - the European Commission and Gulf Cooperation
Council.
● India
has been a member of the FATF since 2010.
How is a country listed under Grey/Black List?
● FATF
members meet regularly to monitor various countries, “review money laundering
and terrorist financing techniques and counter-measures; and promote the
adoption and implementation of the FATF Recommendations globally”.
● The
decision-making body of the FATF or Plenary meets thrice a year, in February,
June and October, to take stock of “Mutual
Evaluation Reports” (MERs) of the countries they review.
● If
a country appears to have major deficiencies in its AML/CFT regime, it is put
on a list of “jurisdictions under increased monitoring” or what is called the
“grey list”, and if it fails to address FATF concerns it is put on a “high-risk
jurisdictions” list, called the “black list”.
Lists under FATF:
Grey List:
● Countries
that are considered safe haven for supporting terror funding and money
laundering are put in the FATF grey list. Inclusion in this list means a
warning to the country that it may enter the blacklist.
● Pakistan
has been removed from this list recently.
Black List:
● Countries
known as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist.
● These
countries support terror funding and money laundering activities.
● The
FATF revises the blacklist regularly.
● Iran and Democratic
People’s Republic of Korea (DPRK) are under
High-risk Jurisdiction or black list.
● Recently,
Myanmar has been added to this list.
Impacts for the country under the list:
● Countries
on both lists are subject to increasing levels of financial strictures, as the
listing is like a global rating, and makes it difficult to procure loans from
financial organizations like the IMF/World Bank, ADB etc., as well as to invite
investment from private companies and other countries.