FINANCIAL ACTION TASK FORCE (FATF)
1.Context
The Finance Ministry’s notification placing all transactions involving virtual digital assets under the purview of the Prevention of Money Laundering Act (PMLA) is a much-needed, even if belated, step.
The government has been struggling in recent years to formulate an appropriate regulatory response to deal with the pandemic-era upsurge in advertisements soliciting investment in virtual assets as well as reports of actual investment
2.Financial Action Task Force (FATF)
- The FATF is an inter-governmental body that sets international standards seeking to prevent international financial crimes that aid terrorism. The FATF was established in July 1989 by a G-7 summit in Paris to examine and develop measures to combat money laundering.
- The FATF currently comprises 37 member jurisdictions and two regional organizations European Commission and Gulf Cooperation Council, representing most major financial centers in all parts of the globe. India has been a member of the FATF since 2010. India is also a member of its regional partners, the Asia Pacific Group (APG) and the Eurasian Group (EAG).
- Its secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris.
After the 9/11 attacks, the FATF in October 2001 expanded its mandate to incorporate efforts to combat terrorist financing. In April 2012, it added efforts to counter the financing of the proliferation of weapons of mass destruction. The FATF has developed the FATF recommendations, or FATF standards, which ensure a coordinated global response to prevent organized crime, corruption, and terrorism.
3. FATF Lists
3.1 Grey List
Countries that are considered safe heaven for supporting terror funding and money laundering are put on the FATF Grey list. This inclusion serves as a warning to the country that it may enter the Black list.
Recently Democratic Republic of Congo, Mozambique, and Tanzania are added to the Grey List.
3.2 Black List
Countries known as Non-cooperative countries or Territories are put on the Black list. These countries support Terror funding and Money Laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.
Currently, Iran and the Democratic people's Republic of Korea are under High-risk jurisdiction or Black list. Myanmar was added to the list.
Moved Myanmar is from the "grey list" taken by the military junta since they overthrew the government in a coup last February.
4.Way Forward
As it has pointed out, the fact that a few countries have moved to regulate virtual assets, and some others have banned them outright, while a majority have not taken any action has created a global system with loopholes for criminals and terrorists to abuse
India, which holds the presidency of the G-20, has been repeatedly stressing the need for a globally coordinated regulatory response to deal with crypto assets
While the Centre’s decision to add the PMLA monitoring requirements, following the introduction of a tax regime for virtual digital assets in last year’s Budget, has been interpreted by the crypto assets sector as moves towards regulating rather than proscribing it, the RBI’s consistent advocacy for a ban needs to be seriously weighed before any decision is taken on the fate of the long-delayed draft legislation on virtual assets
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For Prelims: PMLA, FATF, Grey List,
For Mains:
1.Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog . Discuss(250 Words)
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