FINANCIAL ACTION TASK FORCE (FATF) (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     29th June 2024        

Context: India has reached a "high level of technical compliance" with FATF's global anti-money laundering requirements, although the agency highlighted the need for enhanced supervision and implementation of preventive measures in certain non-financial sectors.

 Financial Action Task Force (FATF)

  • About:  leads global action to tackle money laundering, terrorist and proliferation financing.
  • Founded in:  1989 on the initiative of the G7.
  • Headquarters: Paris, France.
  • FATF Membership: Consists of 39 countries, including major nations such as the United States, India, China, Saudi Arabia, Britain, Germany, France, and the EU.

oIndia joined FATF in 2010.

  • 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.
  • Function: 

oCoordinate global response: Development of FATF Recommendations, also known as FATF Standards, to ensure a coordinated global response against organized crime, corruption, and terrorism.

oEffective Money Pursuit: Assistance provided by FATF to authorities in tracking and seizing the funds of criminals engaged in illegal activities such as drug trafficking and human trafficking.

oEvaluation of Anti-Money Laundering Frameworks: Assessment conducted by FATF to evaluate the strength of a country's anti-money laundering and counter-terrorist financing frameworks.

oMutual Evaluations (ME): FATF conducts regular peer-reviewed evaluations known as Mutual Evaluations (ME) to assess countries' compliance with the standards set by FATF.

FATF has maintained Two list: 

  • Blacklist Countries (NCCTs): Designated as "high-risk jurisdictions subject to call for action" due to significant deficiencies in their AML/CFT regimens.

oFATF urges members and non-members to apply enhanced due diligence when dealing with these countries.

oCurrent blacklisted countries: North Korea and Iran.

  • Grey List Countries: Under global watch by FATF for inadequate prevention of money laundering and terrorist financing.

oInclusion serves as a warning of potential blacklisting.

oExample: Current grey list includes Barbados and Albania.

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