Financial Action Task Force (FATF)

Source:  LM

Context: The Financial Action Task Force (FATF) strongly condemned the April 2025 Pahalgam terror attack and announced intensified scrutiny of countries’ efforts in countering terror financing.

About Financial Action Task Force (FATF):

• What is FATF?
  • The Financial Action Task Force (FATF) is an intergovernmental policy-making body that sets global standards to combat money laundering, terror financing, and proliferation financing.
• Established: 1989 at the G7 Summit in Paris.
• Mandate Expansion: In 2001, it included terrorism financing.
• Headquarters: Paris, France.
• Objectives:
  • Develop and promote global AML/CFT standards.
  • Evaluate compliance of member countries.
  • Assist nations in building robust anti-financial crime frameworks.
  • Coordinate international efforts against terror-linked financial flows.
• Key Functions:
  • Issuing FATF Recommendations: FATF issues 40 global standards to guide countries on anti-money laundering and counter-terror financing. These form the core of international financial compliance.
  • Mutual Evaluations of National Frameworks: FATF reviews member countries to assess effectiveness of their AML/CFT systems. It identifies gaps and pushes for reforms.
  • Identifying and Monitoring High-Risk Jurisdictions: FATF places non-compliant countries on grey or black lists. This impacts their global trade and financial access.
  • Raising Awareness on Emerging Threats: FATF alerts nations about risks like crypto misuse, crowdfunding, and digital laundering. It promotes timely regulatory action.
• Lists Issued by FATF:
  • Grey List (Increased Monitoring)
    • For countries with strategic deficiencies in AML/CFT frameworks.
    • Affects FDI, financial ratings, and access to global lending.
  • Blacklist (High-Risk Jurisdictions)
    • Countries non-cooperative in curbing terror financing and money laundering.
    • Currently includes North Korea, Iran, and Myanmar.
  • Significance of FATF:
    • Enhances international cooperation in tracking illicit financial flows.
    • Deters terror state sponsorship by impacting financial systems.
    • Helps countries strengthen domestic legal and institutional responses.
  • India & FATF:
    • Joined in 2010 as a full member.
    • Member of Asia Pacific Group (APG) and Eurasian Group (EAG).
    • Actively engages in global CFT/AML standard setting and enforcement.