FATF

FATF

Subject: International Organizations

Context: The Financial Action Task Force (FATF) had deferred its once-a-decade evaluation of India’s anti-money laundering regime scheduled for this year, citing the COVID-19 pandemic, and indicated that the onsite review to be conducted by global experts may now take place in early 2021.

Concept:

• The FATF undertakes peer reviews of each member on an ongoing basis to assess the implementation of its recommendations and provides a detailed analysis of each country’s system for preventing criminal abuse of the financial system.

About FATF

• The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 on the initiative of the G7.
• It is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas.
• The FATF Secretariat is housed at the OECD headquarters in Paris.

Roles and functions:

• Initially it was established to examine and develop measures to combat money laundering.
• In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.
• In April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.

Composition:

• The FATF currently comprises 37 member jurisdictions and 2 regional organisations, representing most major financial centres in all parts of the globe. It also has observers and associate members.

Blacklist and Grey list

• Black List: Countries knowns 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, adding or deleting entries.
• Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.
• Considered in the grey list may face:

Economic sanctions from IMF, World Bank, ADB.

Problem in getting loans from IMF, World Bank, ADB and other countries.

Reduction in international trade.

International boycott.