Financial Action Task Force FATF upsc

Financial Action Task Force (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. 

• FATF does not address at all issues related to low tax jurisdiction or tax competition. 

• The FATF mandate focuses only on the fight against laundering of proceeds of crimes and the financing of terrorism. 

FATF ‘40+9’

• FATF issues a report containing a set of Forty Recommendations, which are intended to provide a comprehensive plan of action needed to fight against money laundering. 

• In 2001, the development of standards in the fight against terrorist financing was added to the mission of the FATF thereby further adding 9 Special Recommendations. 

• FATF has formed 40 recommendations against money laundering and 9 special recommendations against terrorist financing, which forms the commonly known ‘40+9’ FATF Standards.

Mutual Evaluations

• The FATF conducts peer reviews of each member to assess levels of implementation of the FATF Recommendations. 

• It provides an in-depth description and analysis of each country’s system for preventing criminal abuse of the financial system. 

FATF Blacklist and Greylist

• FATF issues a list of ‘Non-Cooperative Countries or Territories’ (NCCTs), commonly called the FATF Blacklist. 

• These countries or territories are considered to be uncooperative in international efforts against money laundering and terrorism financing. 

• The grey list is a list of countries or territories with strategic anti-money laundering/countering the financing of terrorism deficiencies for which they have developed an action plan with the FATF.