FATF team in India to hold on-site review meetings
What is FATF?
- The Financial Action Task Force (FATF) is an intergovernmental body that establishes global guidelines to combat money laundering and terrorism financing. In addition, the FATF encourages the effective adoption of legal, regulatory, and operational measures to address unlawful activities.
- The FATF:
- investigates how money is laundered and how terrorists are supported
- Promotes worldwide standards to reduce risks
- Determines whether or not governments are taking effective action.
- Establishes guidelines to prevent illicit acts and the damage they inflict.
- Makes legal rules in these sectors.
- The FATF has 40 money laundering recommendations and nine special recommendations on terrorism financing. India joined the FATF as an observer in 2006 and is working toward full membership. Raja Kumar of Singapore was appointed as the FATF’s president.
What are the functions of the FATF?
- Researching how money is laundered and terrorism is funded
- Promoting global standards to mitigate the risks
- Assessing whether countries are taking effective action
- Setting international standards
- Promoting cooperation among countries
- Monitoring compliance with its standards
- Providing guidelines for effective implementation of legal, regulatory, and operational measures
- Reviewing money laundering and terrorist financing techniques and counter-measures
What are the various types of lists?
- While the terms ‘grey’ and ‘black’ lists do not appear in the official FATF lexicon, they denote countries that need to improve their compliance with FATF regulations and those that do not.
- FATF publishes two lists of countries after each plenary meeting. The grey countries have been identified as “jurisdictions under heightened supervision,” and they are collaborating with the FATF to combat unlawful financial activity.
- The watchdog does not advise other members to take due diligence measures concerning the listed country, but it does advise them to examine the risks that such countries pose. There are now 23 countries on the grey list, including Pakistan.
- The term “black list” refers to countries that have been identified as “high-risk jurisdictions subject to a demand for action.”
- In this situation, the countries’ AML/CFT (anti-money laundering and counter-terrorist financing) regimes are very deficient, and the body urges members and non-members to exercise increased due diligence.
- In the most extreme incidents, members are instructed to take countermeasures, such as imposing penalties on the countries on the list. North Korea and Iran are currently on the blacklist.
What is the purpose of the FATF team’s visit to India?
- Legal Framework Evaluation: Examining the legal and regulatory environment in India for combating money laundering and terrorism financing.
- FATF Standard Implementation: Evaluating India’s compliance with the Financial Action Task Force (FATF) standards and recommendations in its national policies and procedures.
- Measures’ Effectiveness: Evaluating India’s methods for avoiding criminal abuse of the financial system and addressing the dangers linked with money laundering and terrorism funding.
- Engagement of the Government and Law Enforcement Agencies: Meetings with senior government officials, private sector leaders, and important law enforcement agencies involved in anti-money laundering and counter-terrorist funding activities.
- Drafting a Mutual Evaluation Report: Developing a detailed mutual evaluation report that addresses both technical compliance and the efficiency of India’s anti-money laundering and counter-terrorism funding system.
- Discussion in FATF Plenary: Presenting the findings and draft report to a FATF plenary conference, where member countries discuss and analyze the report’s content, including any areas that need attention or improvement.
- Final Report Publication: Adopting for publishing the final mutual evaluation report, which may include ratings and suggestions for the country under review.
- Compliance with Global Standards: Assuring that India adheres to the FATF’s worldwide standards, helping global efforts to combat financial crime and preserve the integrity of the international financial system.
In summary, the FATF team’s visit to India is part of a peer review procedure to assess the country’s commitment and efficiency in implementing anti-money laundering and counter-terrorism financing measures. The ultimate goal is to boost the global fight against financial crime and to foster an international financial system that is secure and transparent.