From UPSC perspective, the following things are important :
Prelims level : FATF
Mains level : Money laundering and terror financing
Pakistan is unlikely to exit the Financial Action Task Force (FATF’s) greylist with this plenary session as well.
Practice question for mains:
Q.What is FATF? Discuss its role in combating global financial crimes and terror financing.
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.
Why is Pakistan under its scanner?
- Pakistan 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.
- In June 2018, Pakistan gave a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime, and to address its strategic counter-terrorism financing-related deficiencies.
- Pakistan and the FATF then agreed on the monitoring of 27 indicators under a 10-point action plan, with specific deadlines.
- The understanding was that the successful implementation of the action plan, and its physical verification by the APG, would lead the FATF to move Pakistan out of the Grey List.
- However, Islamabad managed to satisfy the global watchdog over just five of them.
What are the Black List and Grey List of the FATF?
FATF has 2 types of lists;
1. Black List
2. Grey List
1. Meaning of Black List: Only those countries are included in this list that FATF considers as uncooperative tax havens for terror funding. These countries are known as Non-Cooperative Countries or Territories (NCCTs). In other words; countries that are supporting terror funding and money laundering activities are placed in the Blacklist.
The FATF blacklist or OECD blacklist has been issued by the Financial Action Task Force since 2000 and lists countries which it judges to be non-cooperative in the global fight against money laundering and terror funding.
The FATF updates the blacklist regularly, adding or deleting entries.
(This map shows the countries included in the Greylist)
2. Meaning of Grey List: Those countries which are not considered as the safe heaven for supporting terror funding and money laundering; included in this list. The inclusion in this list is not as severe as blacklisted.
Now Grey list is a warning given to the country that it might come in Black list (Just like a yellow card in a football match). If a country is unable to curb mushrooming of terror funding and money laundering; it is shifted from grey list to black list by the FATF.