Financial Action Task Force (FATF)

Financial Action Task Force (FATF): RBI Governor urged a balanced approach to anti-terror financing (FATF), cautioning against measures that could stifle investments and financial inclusion, while emphasizing stakeholder cooperation.

• About Financial Action Task Force (FATF): It is an intergovernmental policy-making & standard-setting body.
• Objective: Establishes international standards and promotes national & global policies to combat money laundering and terrorist financing.
• Established: 1989 (G7 Summit, Paris) to address money laundering.
• Expanded Mandate: 2001 (Included terrorism financing).
• Headquarters: Paris, France.
• Membership: 39 countries, including U.S., India, China, Saudi Arabia, U.K., Germany, France & EU.
• Affiliated Countries: 180+ nations via FATF-style regional bodies (FSRBs).
• India's Membership: Since 2010. Also a member of Asia Pacific Group (APG) & Eurasian Group (EAG).
• Eligibility Criteria: A country must be strategically important (large population, GDP, banking & insurance sector) and adhere to global financial standards.
• Functions of FATF: Researches & analyses global money laundering & terror financing methods.

o Promotes AML/CFT standards and monitors compliance among member nations.

o Publishes reports on new money laundering, terror financing & proliferation financing

o-techniques. Holds non-compliant countries accountable by imposing monitoring and sanctions.

• FATF Black List: Countries with high-risk terror funding & money laundering, labeled as Non-Cooperative Countries or Territories (NCCTs).
• Current Blacklist: North Korea, Iran, Myanmar.

o Grey List: Countries flagged for insufficient AML/CFT measures, serving as a warning before blacklisting.

• Consequences of FATF Blacklisting: No financial aid from IMF, World Bank, ADB, and EU.

o Economic & financial restrictions, including sanctions and international trade limitations.