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Financial Action Task Force (FATF)

Topics Covered: Indian and its neighbourhood. Important International institutions, agencies and fora, their structure, mandate.

Financial Action Task Force (FATF)

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: The decision by a Pakistani court in Sindh to acquit Ahmed Omar Sheikh Saeed of murdering journalist Daniel Pearl will be raised by India at the next meeting of the Financial Action Task Force, where Pakistan’s greylist status will come up for discussion.

The accused in the murder of a U.S. journalist had been released by India in 1999 in exchange for 155 hostages.

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.

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.

Objectives:

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.

What is 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:

  1. Economic sanctions from IMF, World Bank, ADB.
  2. Problem in getting loans from IMF, World Bank, ADB and other countries.
  3. Reduction in international trade.
  4. International boycott.

Who is FATF President? 

The FATF President is a senior official appointed by the FATF Plenary from among its members for a term of one year.

Insta Links:

Prelims Link:

  1. G7 vs G8 vs G20.
  2. Black vs Grey list.
  3. Are FATF’s decisions binding on member countries?
  4. Who heads the FATF?
  5. Where is its secretariat?

Mains Link:

What is the mandate and objectives of Financial Action Task Force? Discuss its importance for India – Pakistan relations.

Sources: the Hindu.