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DAILY NEWS ANALYSIS

  • 28 June, 2020

  • 10 Min Read

About FATF

About FATF

  • The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog.
  • The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society.
  • As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
  • With more than 200 countries and jurisdictions committed to implementing them.
  • The FATF has developed the FATF Recommendations, or FATF Standards, which ensure a co-ordinated global response to prevent organised crime, corruption and terrorism.
  • They help authorities go after the money of criminals dealing in illegal drugs, human trafficking and other crimes. The FATF also works to stop funding for weapons of mass destruction.
  • The FATF reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks, such as the regulation of virtual assets, which have spread as cryptocurrencies gain popularity.
  • The FATF monitors countries to ensure they implement the FATF Standards fully and effectively, and holds countries to account that do not comply.

Functions of 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.
  • In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.
  • In April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.
  • Since its inception, the FATF has operated under a fixed life-span, requiring a specific decision by its Ministers to continue. Three decades after its, creation, in April 2019, FATF Ministers adopted a new, open-ended mandate for the FATF.

Objectives of FATF

  • 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.
  • FATF monitors countries' progress in implementing the FATF Recommendations; reviews money laundering and terrorist financing techniques and counter-measures; and, promotes the adoption and implementation of the FATF Recommendations globally.

Pakistan’s status

  • Pakistan has been under the FATF’s scanner since June, 2018, when it was put on the greylist for terror financing and money laundering risks, after an assessment of its financial system and law enforcement mechanisms.
  • In June 2018, Pakistan gave a high-level political commitment to work with the FATF and the Asia Pacific Group (APG) to strengthen its anti-money laundering/combating the financing of terrorism (AML/CFT) regime.
  • Based on this commitment, Pakistan and the FATF agreed on the monitoring of 27 indicators under a 10-point action plan, with deadlines.
  • Successful implementation of the action plan and its physical verification by the APG will move Pakistan out of the greylist; failure by Pakistan will result in its blacklisting by September 2019.
  • FATF wants to see effective implementation of targeted financial sanctions against all terrorists designated under UN Security Council Resolutions 1267 and 1373.
  • The Joint Group of the APG has recently informed Pakistan that the country’s compliance on 18 of the 27 indicators is unsatisfactory, though the FATF has agreed that there have been improvements in the AML/CFT regime and the integrated database for currency declaration arrangements.
  • At least three votes (out of 36) would be needed to block a move to blacklist Pakistan. Pakistan may make a diplomatic push to thwart blacklisting.

Impact of being blacklisted

  • Pakistan’s $6 billion loan agreement with the International Monetary Fund (IMF) could be threatened.
  • Pakistan faces an estimated annual loss of $10 billion if it stays in the greylist; if blacklisted, its already fragile economy will dealt with a powerful blow.

India’s Role

  • India is a voting member of the FATF and APG, and co-chair of the Joint Group.
  • India was not part of the group that moved the resolution to greylist Pakistan in 2018 in Paris. The movers were the US, UK, France, and Germany and China did not oppose.
  • As of now, India is pushing for Pakistan to be blacklisted.
  • There is also an opinion that by keeping Pakistan in the grey list one can continue to pressure the country as well as scrutinise its actions.

Asia Pacific Group

  • The Asia/Pacific Group on Money Laundering is an inter-governmental organisation, consisting of 41 member jurisdictions, focused on ensuring that its members effectively implement the international standards against money laundering, terrorist financing and proliferation financing related to weapons of mass destruction.

UN Security Council Resolutions 1267 and 1373

  1. The UNSC resolution 1267 was adopted unanimously on October 15, 1999. It is a consolidated list of people and entities that UN has determined as being associated with Al Qaeda or the Taliban, and laws which must be passed within each member nation to implement the sanctions.
  2. The UNSC Resolution 1373 was adopted on 28th September, 2001. It declares international terrorism a threat to international peace and security and imposes binding obligations on all UN member states.

Source: TH/WEB


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