FINANCIAL ACTION TASK FORCE (FATF)
1. Context
The Financial Action Task Force, the global watchdog on anti-money laundering and combating financing terrorism (AML/CFT) efforts, announced it would take Pakistan off its "grey list" of countries under "enhanced monitoring", and welcomed what it called Pakistan's "significant progress" in improving legal and governments mechanisms.
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.
3. Mandate of FATF
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.
4. FATF Lists
4.1 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.
4.2 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.
5. Why Pakistan is removed from the Grey List?
- Deliberations of the FATF are made in complete secrecy, and decisions are meant to be made strictly on the basis of technicalities and procedure, so the greylisting of Pakisthan has to be seen in the totality of the process and measures it has undertaken.
- Pakistan was also on the "grey list" from 2012-2015 when FATF mandated many steps. Since 2018, it has been handed two action plans, comprising 34 points (27+7), asking Islamabad to bring in laws on money laundering, and anti-terror laws in line with international requirements.
- Pakistan also had to maintain a database of terror groups operating on its soil and the actions taken against them.
6. Benefits for Pakistan
- If removed from the grey list Pakistan would essentially receive a reputational boost and get a clean bill of health from the international community on terror financing.
- There is research that suggests grey listing negatively impacts the relationship of the concerned countries with the international funders including Banks and financial institutions that take note of FATF rankings as well as existing potential overseas investors in those countries.
7. Indias Response
- India is a member, and hence party to all FATF decisions that are made by consensus. As a result, it also agreed to the decision to take Pakistan off the list, conceding in a statement that due to the FATF, Pakistan had been "forced to take" some action against well-known terrorists", including those involved in the Mumbai 26/11 attacks.
- The Narendra Modi Government is preparing for India's turn at FATF scrutiny or MER process, set to begin in early 2023, which it hopes will be a smooth process. In July this year while introducing the Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities) Amendment.
- External Minister S. Jaishankar told parliament that India had to take its international commitments on WMD seriously, both at the UN Security Council, and FATF recommendations which had "mandated provisions against financing in relation to WMDs.
For Prelims & Mains
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For Prelims: FATF, Grey list, Black List, UN Security Council, Weapons of mass destruction, Asia Pacific Group (APG), Organisation for Economic Cooperation and Development (OECD), and the Eurasian Group (EAG).
For Mains: 1. Discuss the mandate of FAFT on Terror Financing and explain the benefits of Pakistan after removing it from the grey list.
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Source: The Hindu
