FATF - INTERNATIONAL

News: Citing FATF, Centre urges Supreme Court to let S.K. Mishra continue as Enforcement Directorate chief

 

What's in the news?

       The Supreme Court agreed to hear an urgent application moved by the Centre to allow Enforcement Directorate (ED) Director Sanjay Kumar Mishra to continue in office till October 15.

 

FATF:

       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.

       It was established in 1989 during the G7 Summit in Paris.

       Its Secretariat is located at the Organization for Economic Cooperation and Development (OECD) headquarters in Paris.

 

Functions:

       The FATF has developed the FATF Recommendations, or FATF Standards, which ensure a coordinated global response to prevent organized crime, corruption and terrorism.

       They help authorities go after the money of criminals dealing with illegal drugs, human trafficking, and other crimes.

       The FATF also works to stop funding for weapons of mass destruction.

       It also assesses the strength of a country’s anti-money laundering and anti-terror financing frameworks.

       It does not go by individual cases.

 

Members:

       FATF currently has 39 members including two regional organizations - the European Commission and Gulf Cooperation Council.

       India has been a member of the FATF since 2010.

 

How is a country listed under Grey/Black List?

       FATF members meet regularly to monitor various countries, “review money laundering and terrorist financing techniques and counter-measures; and promote the adoption and implementation of the FATF Recommendations globally”.

       The decision-making body of the FATF or Plenary meets thrice a year, in February, June and October, to take stock of “Mutual Evaluation Reports” (MERs) of the countries they review.

       If a country appears to have major deficiencies in its AML/CFT regime, it is put on a list of “jurisdictions under increased monitoring” or what is called the “grey list”, and if it fails to address FATF concerns it is put on a “high-risk jurisdictions” list, called the “black list”.

 

Lists under FATF:

Grey List:

       Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. Inclusion in this list means a warning to the country that it may enter the blacklist.

       Pakistan has been removed from this list recently.

 

Black List:

       Countries known as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist.

       These countries support terror funding and money laundering activities.

       The FATF revises the blacklist regularly.

       Iran, Myanmar and Democratic People’s Republic of Korea (DPRK) are under high-risk jurisdiction or black list.

 

Impacts for the country under the list:

       Countries on both lists are subject to increasing levels of financial structures, as the listing is like a global rating, and makes it difficult to procure loans from financial organizations like the IMF/World Bank, ADB etc., as well as to invite investment from private companies and other countries.