Financial Action Task Force (FATF)
- Posted By
10Pointer
- Categories
Economy
- Published
18th Feb, 2020
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Context
- A crucial meeting of the Financial Action Task Force (FATF) began in Paris. The plenary session of the FATF will take stock of Pakistan's role in terror financing.
- During the six-day meeting, more than 800 representatives from 205 countries, IMF, United Nations, World Bank and other organizations will focus on global action to follow the money that fuels crime and terrorism.
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What is FATF?
- The Financial Action Task Force (FATF) is an intergovernmental organization that designs and promotes policies and standards to combat financial crime.
- It was established in 1989 during the G7 Summit in Paris to develop policies against money laundering.
- It is a “policy-making body” which works to generate the political will to bring about national legislative and regulatory reforms in money laundering.
- It has also started dealing with virtual currencies. The FATF Secretariat is located in Paris.
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Why do we need FATF?
- The rise of the global economy and international trade has given rise to financial crimes such as money laundering.
- The Financial Action Task Force (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.
- Because money launderers and others alter their techniques to avoid apprehension, the FATF must update its recommendations every few years.
- The objectives of the FATF are 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.
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Who are FATF Members?
- As of 2020, there were 39 members of the Financial Action Task Force, including the European Commission and the Gulf Cooperation Council.
- 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.
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How to become a member of FATF?
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How is Pakistan involved?
- The FATF review entered Pakistan in the grey list in June 2018. The organization gave 27 action plans for the country to be fulfilled before September 2019 for being considered to get the country out of the grey list.
- The recent reviews have discovered that the country could only fulfill 7 conditions out of the 27 which will mean a bad performance by Pakistan in the lines of addressing the AML/CFT deficiencies.
- The three possibilities in front of the country would be to get out of the grey list, to continue in the grey list or in the worst case, enter the black list.
- Only if three countries support the motion, Pakistan has chances of not entering the blacklist.
- In order to get out of the grey list, Pakistan will need the support of not less than 15 countries.
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Consequences of being in the FATF grey list:
- Economic sanctions from IMF, World Bank, ADB
- Problem in getting loans from IMF, World Bank, ADB and other countries
- Reduction in international trade
- International boycott
Quick Recap
- Financial Action Task Force (FATF)—intergovernmental organization—established in 1989 during the G7 Summit in Paris—Secretariat is located in Paris.
- FATF has 39 members including the European Commission and the Gulf Cooperation Council.
- India became an Observer at FATF in 2006—became 34th country member of FATF On June 25, 2010.
- North Korea and Iran are the only two countries in Blacklist of FATF. Twelve countries are in the grey list including Pakistan (since June 2018) and Sri Lanka.
- In order to get out of the grey list, a counrty will need the support of not less than 15 countries.
- Only if three countries support the motion, a country has chances of not entering the blacklist from the greylist.
