FATF which is Financial Action Task Force is expected to release its report on India’s mutual evaluation which was adopted at its june 2024 plenary in Singapore, in 19 September.
FATF leads global action to tackle money laundering, terrorist and proliferation financing. There are about 40 members in this body which ensures that the national authorities can effectively go after the funds linked to drug trafficking , illegal arms trade , cyber frauds and other serious crimes.
The FATF investigates how money has been laundered and terrorism is paid and then assess that if the countries are taking effective actions or not. More than 200 countries have committed to implement FATF’s standards as part of a cordinated global response to prevent organized crime, corruption and terrorism. The FATF’s decision-making body, the FATF Plenary, meets three times per year and holds countries to account if they do not comply with the Standard.
Why exactly FATF is in news?
- It is an intergovernmental organization established in 1989 out of a G-7 meeting of developed nation in Paris.
- Secretariat : Located at OECD headquarters in Paris , it supports the substantive work of Financial Action Task Force membership and global network.
- Evolution of Mandate: Originally formed to combat money laundering., it expanded its mandate after the 9/11 attacks to include efforts against terrorist financing.
- Later, efforts to counter the financing of Weapons of Mass Destruction(WMD) were added in 2022.
- Weapons of Mass Destruction (WMD) are weapons that can cause mass destruction and loss of human life on large scale.
Grey Lists and Black Lists in FATF :
Grey List : It is composed of The high risk countries . It includes countries considered safe havens for supporting terror funding and money laundering .
Common criteria of considering a country in The Grey List :
- Lack of up to date and sufficient rules and regulations.
- Lack of satisfactory and adequate regulatory and supervisory frameworks.
- Lack of robust and effective customer due diligence (CDD) measures.
- Lack of transparency in beneficial ownership information.
The Grey Listed countries as of October 2023 :
1. Barbados
2. Bulgaria
3. Burkina Faso
4. Cameroon
5. The Democratic Republic of the Congo (DRC)
6. Croatia
7. Gibraltar
8. Haiti
9. Jamaica
10. Mali
11. Mozambique
12. Nigeria
13. Philippines
14. Senegal
15. South Africa
16. South Sudan
17. Syria
18. Tanzania
19. Turkey
20. Uganda
21. United Arab Emirates (UAE)
22. Vietnam
23. Yemen
Black List : It comprises of Non cooperative countries or territories supporting such activities.
Why and how do countries end up on Black list:
1. Severe and serious deficits in their AML/CFT laws and regulations.
2. Negligence in criminalizing money laundering and terrorism financing.
3. Non-compliance to international standards.
4. Inadequate and non-functional Financial Intelligence Unit (FIU).
Countries listed on Black List :
1. Democratic Republic of North Korea
2. Iran
3. Myanmar
- Sessions and Decision Making : Financial Action Task Force Plenary is the decision making body meeting three times per year to discuss Mutual Evaluation Reports(MERs) of countries.
- Countries with major deficiencies in their anti Money laundry/ Combating the financial of terrorism (AML)/(CFT) regimes are listed under “jurisdictions under increased monitoring”(grey list) or “high risk jurisdiction “(black list).
- Currently, a 40 member body representing major financial centres globally includes :
- two regional organizations : The european commission and the gulf coperation council.
The FATF plays a crucial role in maintaining the integrity of the international financial system and combating financial crimes. For Indian businesses engaged in international trade, understanding and complying with FATF guidelines is essential to mitigate risks, ensure smooth transactions, and build trust with global partners. While the challenges are significant, the opportunities for growth and competitive advantage make compliance a worthwhile investment.
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