FATF Evaluations

Context: 

Government agencies have expedited efforts to further strengthen the anti money laundering and counter terror financing frameworks in view of the coming Financial Action Task Force (FATF) assessment of India in the fourth round of mutual evaluations expected later this year.

                                                 Image Source: Business Standard

About FATF:

• The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. 
• It was set up in 1989 out of a G-7 meeting of developed nations in Paris.
• The 40 Recommendations are divided into seven distinct areas: 

• • AML/CFT Policies and coordination
  • Money laundering and confiscation
  • Terrorist financing and financing of proliferation
  • Preventive measures
  • Transparency and beneficial ownership of legal persons and arrangements
  • Powers and responsibilities of competent authorities and other institutional measures
  • International cooperation

FATF Sessions:

• The FATF Plenary is the decision making body of the FATF.
• It meets three times per year.

Members:

• It is a 39-member body representing most major financial centers in all parts of the globe.
  • Out of 39 members, there are two regional organizations: the European Commission, and the Gulf Cooperation Council.

• Members of FATF: 

• • Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany.
  • Greece, Hong Kong (China), Iceland, India, Ireland, Israel, Italy, Japan, Republic of Korea.
  • Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Portugal, Russia, Saudi Arabia, Singapore.
  • South Africa, Spain, Sweden, Switzerland, Türkiye, the UK and the US.

India and FATF: 

• India joined with ‘observer’ status in 2006 and became a full member of FATF in 2010.

What is FATF ‘grey list’ and ‘blacklist’?

• Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist. 
  • These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.
•  Grey List: Countries that are considered safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.

FATF Recommendations

• The FATF Recommendations provide a comprehensive framework of measures to help countries tackle illicit financial flows. 
• These include a robust framework of laws, regulations and operational measures to ensure national authorities can take effective action to detect and disrupt financial flows that fuel crime and terrorism, and punish those responsible for illegal activity. 

Mutual Evaluations:

• FATF mutual evaluations are in-depth country reports analyzing the implementation and effectiveness of measures to combat money laundering, terrorist and proliferation financing. 
• The reports are peer reviews, where members from different countries assess another country. 
• Mutual evaluations provide an in-depth description and analysis of a country’s anti-money laundering and counter-terrorist financing system, as well as focused recommendations to further strengthen its system.

• Siginificance:

• • The mutual evaluation report is an assessment of a country’s measures to combat money laundering and the financing of terrorism and proliferation of weapons of mass destruction. 

                                                                                                             News Source: The Hindu,  fatf-gafi.org