In Context
- Recently, Financial Action Task Force (FATF), the global watchdog on terror financing and money laundering removed Pakistan from its grey list.
- Pakistan has been on the FATF grey list continuously since June 2018.
About
- FATF decided by consensus that Pakistan has completed all substantial, technical and procedural requirements of both the 2018 and 2021 action plans and as a result,
- Pakistan has been taken off the list of jurisdictions under increased monitoring, with immediate effect.
About Financial Action Task Force (FATF)
- Established: It was established at the G7 Summit of 1989 in Paris.
- Aim: To address loopholes in the global financial system after member countries raised concerns about growing money laundering activities.
- The FATF currently has 39 members. India is a member country.
- The decision-making body of the FATF, known as its plenary, meets thrice a year.
- Its meetings are attended by 206 countries of the global network, including members, and observer organisations, such as the World Bank, some offices of the United Nations, and regional development banks.
- The FATF sets standards or recommendations for countries to achieve in order to plug the holes in their financial systems and make them less vulnerable to illegal financial activities.
- For the countries that don’t perform well on certain standards, time-bound action plans are drawn up.
- Recommendations for countries range from assessing risks of crimes to setting up legislative, investigative and judicial mechanisms to pursue cases of money laundering and terror funding.
- FATF’s ‘grey’ and ‘black’ lists:
- At the end of every plenary meeting, FATF comes out with two lists of countries.
- The grey countries are designated as “jurisdictions under increased monitoring”, working with the FATF to counter criminal financial activities.
- For such countries, the watchdog does not tell other members to carry out due-diligence measures vis-a-vis the listed country but does tell them to consider the risks such countries possess.
- As for the black list, it means countries designated as ‘high-risk jurisdictions subject to call for action.
- Currently, North Korea and Iran are on the blacklist.
- Consequence of being in the List:
- Being listed under the FATF’s lists makes it hard for countries to get aid from organisations like the International Monetary Fund (IMF), Asian Development Bank (ADB), and the European Union. It may also affect capital inflows, foreign direct investments, and portfolio flows.
Source:IE
