GS III-Economy
About:
The Financial Action Task Force (FATF) is an intergovernmental policy-making and standard-setting body focused on combating money laundering and terrorist financing globally.
Objective:
Its main goal is to establish international standards and to develop and promote effective measures—both nationally and internationally—to prevent money laundering and the financing of terrorism.
Mandate and Origin:
FATF was founded in 1989 during the G7 Summit in Paris in response to the growing threat of money laundering. In 2001, its mandate was expanded to include countering terrorism financing.
Headquarters:
FATF is headquartered in Paris, France.
Membership:
Membership is granted to countries that are strategically important—typically those with large populations, significant GDP, or well-developed financial sectors—and that adhere to internationally accepted financial standards and participate in key international organizations.
- FATF currently has 39 member jurisdictions, including the United States, India, China, Saudi Arabia, the United Kingdom, Germany, France, and the European Union.
- Additionally, more than 180 countries are affiliated with FATF through a global network of FATF-style regional bodies (FSRBs).
- India became a full FATF member in 2010 and also participates in two FSRBs: the Asia Pacific Group (APG) and the Eurasian Group (EAG).
Role and Functions:
FATF analyzes how money laundering and terrorist financing operate worldwide, sets global standards to mitigate these risks, and monitors countries’ progress in implementing these measures.
It regularly publishes reports that raise awareness of new trends and techniques in money laundering, terrorist financing, and proliferation financing, enabling governments and the private sector to better respond to these threats.
FATF Recommendations:
The FATF Recommendations are recognized as the international standard for anti-money laundering (AML) and counter-terrorist financing (CFT). All member countries must endorse the latest recommendations and agree to regular mutual evaluations.
Accountability Mechanism:
FATF holds countries accountable for failing to comply with its standards. If a country consistently falls short, it can be listed as a Jurisdiction under Increased Monitoring (grey list) or as a High-Risk Jurisdiction (blacklist).
Grey List and Blacklist:
- Blacklist: Countries designated as Non-Cooperative Countries or Territories (NCCTs) are placed on the blacklist for failing to address significant AML/CFT concerns, often linked to terror financing and money laundering.
- Grey List: Countries identified as having strategic AML/CFT deficiencies but committed to addressing them are placed on the grey list. This serves as a warning that they may be moved to the blacklist if improvements are not made.
Current Blacklist:
As of now, North Korea, Iran, and Myanmar are on FATF’s blacklist.
Consequences of Blacklisting:
- Countries on the blacklist are denied financial assistance from institutions like the IMF, World Bank, ADB, and the EU.
- They also face severe international economic and financial sanctions and restrictions.