FATF retained Pakistan on a grey list in a decision taken during its Plenary Meet of 21 to 23 October 2020. What is FATF? What is its grey list? What is the interaction of Pakistan with FATF? What is the way ahead for India in relation to Pakistan and FATF?
FATF is an intergovernmental organisation founded in 1989 on the initiative of the G7 to develop policies to combat money laundering (ML). In 2001, its mandate was expanded to include terrorism financing. In April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction. In October 2019, the G20 asked the FATF to consider the Anti Money Laundering/ Counter-Financing Terrorism (AML/CFT) issues relating to so-called stable coins, particularly so-called “global stable coins. The report confirms that the FATF Standards apply to so-called stable coins. However, the report also recognises that this is a rapidly evolving area and that it is essential to continue to closely monitor the ML/TF (Terror Financing) risks of stable coins.
It has its headquarters at Paris, France. FATF’s aim is to prevent financial illegal activities and the harm they cause to society. As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. With more than 200 countries and jurisdictions committed to implementing them, the FATF has developed the FATF Recommendations or FATF Standards, which ensure a coordinated global response to prevent organised crime, corruption, terrorism, and proliferation funding.
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. Starting with its own members, the FATF monitors countries’ progress in implementing the FATF Recommendations, reviews money laundering and terrorist financing techniques and counter-measures, and, promotes the adoption and implementation of the FATF Recommendations globally.
The FATF currently comprises of total 39 members.
(a) 37 countries and two regional organizations (European Commission and the Gulf Cooperation Council).
(b) Associate Members – 9.
(c) Observer Organisations – 28.
(d) FATF Observer Nation – Indonesia.
The FATF President is a senior official appointed by the FATF Plenary from among its members. In April 2019, the revised Mandate extended the terms of the FATF Presidency to a two-year period. The term of the President begins on 1 July and ends on 30 June two years after assuming office. Dr. Marcus Pleyer of Germany assumed the position of President of the FATF on 1 July 2020. He succeeded Xiangmin Liu of the People’s Republic of China. Increased tenure will increase consistency in policy issues of FATF.
Very often grey and blacklists are mentioned. However, there is no such official terminology.
FATF Blacklist. Officially known as ‘High-Risk Jurisdictions subject to a Call for Action’. The FATF blacklist sets out the countries that are considered deficient and/or non-cooperative in their anti-money laundering and counter financing of terrorism regulatory regimes. The list is intended to serve not only as a way of negatively highlighting these countries on the world stage, but as a warning of the high money laundering and terror financing risk that they present. It is extremely likely that blacklisted countries will be subject to economic sanctions and other prohibitive measures by FATF member states and other international organizations. The blacklist is updated periodically in official FATF reports. The current FATF blacklist includes two countries: North Korea and Iran.
FATF Grey list. Officially known as ‘Jurisdictions Subject to Increased Monitoring’. When FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring. Countries on th