PM pushes to strengthen FATF

4 min read

News:On the sidelines of the 74th UN General Assembly session,Indian Prime minister attended the Dialogue on Strategic Responses to Terrorist and Violent Extremist Narratives.

Facts:

  • The dialogue was organised by Jordan, France and New Zealand and attended by leaders of about 24 countries but did not include either China or Pakistan.
  • Addressing the session,Indian Prime minister said that institutional mechanism against terrorism like UN Security Council(UNSC) sanctions and the Financial Action Task Force (FATF) listings must not be politicised.

Additional information:

About FATF:

  • The Financial Action Task Force(FATF) is an inter-governmental body established in 1989 on the initiative of the G7.
  • It is a policy-making body which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas.
  • The FATF Secretariat is housed at the OECD headquarters in Paris, France.

Objectives:

  • The objectives of the FATF are to (a) set standards and promote effective implementation of legal, regulatory and operational measures (b) for combating money laundering (c)terrorist financing and (d) other related threats to the integrity of the international financial system.

Listing by FATF:FATF maintains two different lists of countries:

  • Grey list:The grey list contains those countries that have deficiencies in their anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.But they commit to an action plan to address these loopholes, 
  • Black list:These countries are those that do not end up doing enough even after having deficiencies in their anti-money laundering (AML) and combating the financing of terrorism (CFT) regime.

Which countries are listed?

  • As of now there are only two countries in the blacklist which are Iran and North Korea.
  • Further,there are seven countries on the grey list which includes countries such as  Pakistan, Syria , Yemen among others.

Implications of listing:

  • Once a country is on grey list,the country is downgraded by institutions like IMF, World Bank, ADB, EU and also reduction in risk rating by Moody’s, Fitch and S&P.
  • Further,if the country is blacklisted,FATF calls on other countries to apply enhanced due diligence and counter measures,increasing the cost of doing business with the country and in some cases severing it altogether.