Financial Action Task Force (FATF): Objectives, Grey List, Black List and India’s Role

Subject: GS 02: IR

Context: India’s Culture Secretary Vivek Aggarwal has been appointed Vice-President of the Financial Action Task Force (FATF) for the 2026–27 term.

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About Financial Action Task Force (FATF)

• FATF is an intergovernmental body that develops global standards to combat money laundering, terrorist financing and proliferation financing.
• Establishment: FATF was established in 1989 by the G7 Summit in Paris to address the growing threat of money laundering.
  • Its mandate was expanded in 2001 to include counter-terrorist financing and in 2012 to cover proliferation financing.
• Headquarters: The FATF Secretariat is administratively hosted at the Organisation for Economic Co-operation and Development (OECD), Paris, France.
• Objectives
  • Anti-Money Laundering (AML): Develops international standards to prevent laundering of proceeds from crime.
  • Counter-Terrorist Financing (CTF): Strengthens global efforts to detect and disrupt terror financing networks.
  • Peer Monitoring: Evaluates countries through Mutual Evaluations to assess compliance with FATF Recommendations.
• Members: FATF comprises 40 members, including 38 jurisdictions and 2 regional organisations—the European Commission and Gulf Cooperation Council (GCC).
  • India became a full member of FATF in 2010.
  • India enforces the recommendations of the FATF primarily through the Prevention of Money Laundering Act (PMLA), 2002 and the Unlawful Activities (Prevention) Act (UAPA), 1967.
• FATF Plenary: The Plenary is the principal decision-making body and meets three times annually.
• The President is the chief representative and leader of FATF, responsible for guiding its strategic priorities, policy agenda and international engagement.
• The Vice-President assists the President in carrying out FATF’s functions and ensures continuity in leadership. 
  • The President and Vice-President  is elected by FATF members for a two-year term. 
• FATF Recommendations: FATF monitors implementation of its 40 Recommendations covering AML/CFT policies, transparency, preventive measures, regulatory oversight and international cooperation.

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• Types of Lists
  • Grey List (Jurisdictions under Increased Monitoring): Includes countries with strategic deficiencies in AML/CFT systems that have committed to corrective action under FATF monitoring.
    • Africa: Angola, Cameroon, Côte d’Ivoire, Democratic Republic of the Congo, Kenya, Namibia, South Sudan
    • Americas: Bolivia, Haiti, VenezuelaAsia-Pacific: Lao PDR, Nepal, Papua New Guinea, Vietnam
    • Europe: Bosnia and Herzegovina, Bulgaria, Monaco, Virgin Islands (UK)
    • Middle East: Iraq, Kuwait, Lebanon, Syria, Yemen
  • Black List (High-Risk Jurisdictions Subject to a Call for Action): Includes countries with serious strategic deficiencies that pose significant risks to the international financial system.
    • North Korea
    • Iran
    • Myanmar
• Implications of Listing 
  • Grey List (Increased Monitoring): Triggers severe banking scrutiny, reduced foreign investment, and elevated borrowing costs.
  • Black List (Call to Action): Results in devastating international economic sanctions and financial isolation
• Significance: FATF plays a critical role in safeguarding the global financial system by combating illicit financial flows, organized crime, terrorism financing and proliferation-related activities.

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