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- Recently, the Financial Action Task Force (FATF) has suspended Russia’s membership due to its illegal invasion of Ukraine.
About
- The FATF has recently expressed its sympathies to the people of Ukraine who have “borne a terrible burden” at the hands of Russia’s “war of aggression”.
- In this regard, suspension of Russian membership is apparently for its gross violation of commitment to international cooperation and mutual respect among FATF members.
- The FATF has called upon all jurisdictions to remain vigilant of threats to the integrity, safety and security of the international financial system arising from Russia’s war against Ukraine.
- Previously, in 2018, it had put Pakistan in its Grey-list for its failure to address the deficiencies in its counter-terrorist financing-related actions.
- However, the FATF in 2022 announced that Pakistan has met its commitments and is no longer subject to increased monitoring.
What is FATF?
- FATF stands for Financial Action Task Force, an inter-governmental organization established in 1989.
- It was formed by the G7 countries to combat money laundering and terrorist financing by setting global standards and monitoring their implementation.
- Its main objective is to develop and promote policies to protect the global financial system against money laundering, terrorist financing, and other related threats to the integrity of the financial system.
- Its headquarters are located in Paris, France, and it has 39 member countries, including the United States, India, China, Saudi Arabia, and European countries such as Britain, Germany, and France.
- Over the yesars, FATF has identified 40 recommendations that set out the basic framework for anti-money laundering (AML) and counter-terrorist financing (CFT) measures.
- FATF has the authority to issue warnings and sanctions against countries that fail to comply with its standards, such as suspension of membership and blacklisting.
FATF ‘grey list’ and ‘blacklist’
- Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put on the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries.
- Grey List: Countries that are considered a safe haven for supporting terror funding and money laundering are put in the FATF grey list. This inclusion serves as a warning to the country that it may enter the blacklist.
- As of 2022, FATF has blacklisted North Korea and Iran over terror financing and 12 countries are on the grey list, namely: Bahamas, Botswana, Cambodia, Ethiopia, Ghana, Pakistan, Panama, Sri Lanka, Syria, Trinidad and Tobago, Tunisia and Yemen.
Consequences of being in the FATF grey list
- The countries in the grey list may face
- Economic sanctions from IMF, World Bank, ADB.
- The problem in getting loans from the IMF, World Bank, ADB and other countries.
- Reduction in international trade.
- International boycott.
Source: TH
