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Saudi Arabia becomes 1st Arab country to get FATF membership

Topics Covered:

  1. Important International institutions, agencies and fora, their structure, mandate.

 

Saudi Arabia becomes 1st Arab country to get FATF membership

 

What to study?

For Prelims: FATF, Grey list, G7.

For Mains: What is Grey list and Black list, how are countries in the list affected?

 

Context: Saudi Arabia has become the first Arab country to be granted full membership of the Financial Action Task Force (FATF) following the group’s annual general meeting in the US.

  • The kingdom’s accession came as the global money laundering watchdog celebrated the 30th anniversary of its first meeting held in Paris in 1989.
  • Saudi Arabia had received an invitation from the FATF at the beginning of 2015 to join as an “observer member“.

 

About FATF:

What is it? 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.

Objectives: The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.

Functions: The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures and promotes the adoption and implementation of appropriate measures globally.  In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.

 

What is blacklist and grey list?

FATF maintains two different lists of countries: those that have deficiencies in their AML/CTF regimes, but they commit to an action plan to address these loopholes, and those that do not end up doing enough. The former is commonly known as grey list and latter as blacklist.

Once a country is blacklisted, FATF calls on other countries to apply enhanced due diligence and counter measures, increasing the cost of doing business with the country and in some cases severing it altogether.

 

Sources: the Hindu.