International Affairs, FATF (Financial Action Task Force)
Why in News?
Pakistan has been listed in the Grey list by the Paris based FATF (Financial Action Task Force) on 29th June 2018.
India has welcomed this move.
“We hope that the FATF Action plan shall be complied with in a time bound manner and credible measures would be taken by Pakistan to address global concerns related to terrorism emanating from any territory under its control,” said the spokesperson of the MEA.
Pakistan was on the Grey List of FATF between years 2012-15 but was taken off the list.
But subsequent terror attacks on Indian targets by groups like Lakshar-e-Taiba (LeT) and Jaish E Mohammed revived the international demand to place the country back in the list.
What is FATF?
The Financial Action Task Force (FATF) was established in July 1989 by a Group of Seven (G-7) Summit in Paris, initially to examine and develop measures to combat money laundering.
The French name for FATF is Groupe d’action financiere (GAFI)
In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.
The FATF has developed a series of Recommendations that are recognised as the international standard for combating of money laundering and the financing of terrorism and proliferation of weapons of mass destruction.
The current mandate of the FATF (2012-2020) was adopted at a Ministerial meeting in April 2012.
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.
The FATF is therefore a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
The FATF’s decision making body, the FATF Plenary, meets three times per year.
What are the recommendations given by FATF to its member states?
FATF has formulated 40 recommendations for its member states. Some of the important recommendations include:
Implement relevant international conventions
Criminalise money laundering and enable authorities to confiscate the proceeds of money laundering
Implement customer due diligence (e.g., identity verification), record keeping and suspicious transaction reporting requirements for financial institutions and designated non-financial businesses and professions
Establish a financial intelligence unit (FIU) to receive and disseminate suspicious transaction reports, and
Cooperate internationally in investigating and prosecuting money laundering
What are the implications for Pakistan on being on the Grey list of FATF?
Being on the Grey List will require Pakistan to meet additional guarantees while borrowing finance from the international donors like the IMF and other such entities.
The decision to place Pakistan back in the Grey List was taken following the Plenary session of FATF in February, but it finally came into force in June 2018.