From UPSC perspective, the following things are important :
Prelims level : FATF
Mains level : Terror financing and money laundering
The global money laundering and terrorist financing watchdog Financial Action Task Force (FATF) has retained Pakistan on its terrorism financing “grey list”.
What is the FATF?
- FATF is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
- The FATF Secretariat is housed at the OECD headquarters in Paris.
- It holds three Plenary meetings in the course of each of its 12-month rotating presidencies.
- As of 2019, FATF consisted of 37 member jurisdictions.
India and FATF
- India became an Observer at FATF in 2006. Since then, it had been working towards full-fledged membership.
- On June 25, 2010, India was taken in as the 34th country member of FATF.
- The EAG (Eurasian Group) is a regional body comprising nine countries: India, Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan and Belarus.
What is the role of FATF?
- Watchdog on terror financing: The rise of the global economy and international trade has given rise to financial crimes such as money laundering.
- Recommendation against financial crimes: The FATF makes recommendations for combating financial crime, reviews members’ policies and procedures, and seeks to increase acceptance of anti-money laundering regulations across the globe.
What is the Black List and the Grey List?
- Black List: The blacklist, now called the “Call for action” was the common shorthand description for the FATF list of “Non-Cooperative Countries or Territories” (NCCTs).
- Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.
Consequences of being in the FATF black list:
- Economic sanctions from IMF, World Bank, ADB
- Problem in getting loans from IMF, World Bank, ADB and other countries
- Trade sanctions: Reduction in international trade
- International boycott
Pakistan and FATF
- Pakistan, which continues to remain on the “grey list” of FATF, had earlier been given the deadline till June to ensure compliance with the 27-point action plan against terror funding networks.
- It has been under the FATF’s scanner since June 2018, when it was put on the Grey List for terror financing and money laundering risks.
- FATF and its partners such as the Asia Pacific Group (APG) are reviewing Pakistan’s processes, systems, and weaknesses on the basis of a standard matrix for anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.