Financial Action Task Force (FATF)

By | November 25, 2020

The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent these 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 Recommendationsor FATF Standards, which ensure a co-ordinated global response to prevent organized crime, corruption, and terrorism. They help authorities go after the money of criminals dealing in illegal drugs, human trafficking, and other crimes.  The FATF also works to stop funding for weapons of mass destruction.

The FATF reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks, such as the regulation of virtual assets, which have spread as cryptocurrencies gain popularity.  The FATF monitors countries to ensure they implement the FATF Standards fully and effectively and holds countries to account that does not comply.

Financial Action Task Force (FATF)

FATF has two lists:

  • 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.
  • Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put on the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.
  • The FATF Plenary is the decision making body of the FATF. It meets three times per year.

FATF Countries (FATF Members)

Currently, there are 38 member countries in the FATF. India is a member of the organization since June 2010. It had earlier acquired ‘Observer’ status at FATF in 2006.

FATF Observers are two in number, namely, Saudi Arabia and Indonesia. There are many other Observer organizations and Associate Members.

Consequences of being in the FATF grey list:

  • Economic sanctions from IMF, World Bank, ADB
  • The problem in getting loans from the IMF, World Bank, ADB, and other countries
  • Reduction in international trade
  • International boycott.

The grey list is updated regularly as new countries are added or as countries that complete their action plans are removed. The current FATF grey list, issued on 21 February 2020, includes the following countries: Albania, the Bahamas, Barbados, Botswana, Cambodia, Ghana, Iceland, Jamaica, Mauritius, Mongolia, Myanmar, Nicaragua, Pakistan, Panama, Syria, Uganda, Yemen, and Zimbabwe.

FATF Black List countries’.

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.

FATF Blacklist countries.

  • Democratic People’s Republic of Korea (DPRK).
  • Iran.

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