Financial Action Task Force (FATF)
The Financial Action Task Force (FATF) is an inter-governmental organisation that sets standards and promotes 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. It was established in 1989 by the G7 countries and is headquartered in Paris, France. The FATF conducts assessments of countries' anti-money laundering and counter-terrorist financing (AML/CFT) systems, and makes recommendations for improvement.
Significance of FATF -
The Financial Action Task Force (FATF) is an important international organisation that plays a key role in combating money laundering and terrorist financing. The organisation sets the global standards for these issues and promotes their implementation through a process of mutual evaluations. This helps ensure that countries have effective systems in place to detect and prevent these illegal activities.
FATF's work is significant as money laundering and terrorist financing can facilitate serious crimes and threaten the integrity of the financial system. It helps governments to detect and prevent these illegal activities, which in turn protects the global financial system from abuse and helps to maintain stability and integrity.
Additionally, countries that do not comply with FATF standards may be subject to counter-measures or sanctions, which can negatively impact their international financial and economic relations. This serves as an incentive for countries to comply with the organisation's standards, which further strengthens the effectiveness of the organisation.
Main Objectives of FATF -
The main objectives of the Financial Action Task Force (FATF) are:
To set international standards for combating money laundering and terrorist financing: The FATF develops and promotes policies and guidelines that aim to prevent, detect, and combat these illegal activities.
To encourage countries to implement these standards: The organisation conducts mutual evaluations of countries' anti-money laundering and counter-terrorist financing systems to assess compliance with its standards.
To provide technical assistance and training to countries: The FATF helps countries improve their systems by providing them with the necessary resources, expertise and training to implement the standards.
To promote cooperation and coordination among countries: The organisation facilitates international cooperation and coordination in the fight against money laundering and terrorist financing, which helps to close gaps in the global system and improve its overall effectiveness.
To enhance transparency and integrity of financial system: By implementing the standards set by the FATF, countries can detect and prevent abuse of the financial system, which helps to maintain the stability and integrity of the global financial system.
FATF and pakistan -
In 2018, Pakistan was placed on the Financial Action Task Force (FATF) Grey List of countries with deficiencies in their Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) regimes. The FATF had identified a number of strategic deficiencies in Pakistan's AML/CFT systems, including a lack of effective implementation of targeted financial sanctions against designated individuals and entities, and insufficient action against illicit cross-border currency movement.
The FATF had given Pakistan a 27-point action plan to improve its AML/CFT regime, and Pakistan was under the scrutiny of the global watchdog to comply with the plan. In June 2018, Pakistan was put on the grey list, and was given an action plan to complete by September 2019. However, due to the lack of progress on the action plan, Pakistan was given an extension till February 2020. However, Pakistan failed to fully comply with the action plan, as a result, in February 2020, the FATF decided to keep Pakistan on its grey list for another year.At present Pakistan has come out of the Gray list of FATF.
What is FATF Gray and Black list
The Financial Action Task Force (FATF) is an inter-governmental organisation that sets global standards for combating money laundering and terrorist financing. One of the ways it does this is by maintaining a list of countries that it deems to be non-compliant with its standards.
The "grey list" is a list of countries that have been identified by the FATF as having deficiencies in their anti-money laundering and countering the financing of terrorism (AML/CFT) regimes. These countries have committed to taking action to address these deficiencies and are subject to increased monitoring by the FATF.
The "black list" is a list of countries that the FATF has determined to be non-compliant with its standards and have not made a commitment to addressing their deficiencies. Countries on the black list are subject to counter-measures, such as financial sanctions, by FATF member countries.