The Financial Action Task Force (FATF)

The Paris-headquartered Financial Action Task Force (FATF) is an inter-governmental body. It was established in 1989 by the Ministers of its Member jurisdictions. The objectives of the FATF are to set standards and promote 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.  The FATF is therefore a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.

Remember This: FATF asses countries’ level of compliance through mutual evaluation process, which relies on peer reviews.

Key Facts About FATF

  • The FATF currently has 35 members and two regional organisations – European Commission and Gulf Cooperation Council.
  • North Korea and Iran are in the FATF blacklist.
  • Pakistan was put on the grey list in July 2018.
  • Pakistan will have to be supported by at least 15 of FATF’s 36 voting members to move out of the ‘grey list’. It needs three votes to prevent blacklisting.
  • Xiangmin Liu of the People’s Republic of China assumed the position of President of the FATF on July 1 2019.

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FATF Members

  • Argentina
  • Australia
  • Austria
  • Belgium
  • Brazil
  • Canada
  • China
  • Denmark
  • European Commission
  • Finland
  • France
  • Germany
  • Greece
  • Gulf Co-operation Council
  • Hong Kong, China
  • Iceland
  • India
  • Ireland
  • Israel
  • Italy
  • Japan
  • Republic of Korea
  • Luxembourg
  • Malaysia
  • Mexico
  • Netherlands, Kingdom of
  • New Zealand
  • Norway
  • Portugal
  • Russian Federation
  • Saudi Arabia
  • Singapore
  • South Africa
  • Spain
  • Sweden
  • Switzerland
  • Turkey
  • United Kingdom
  • United States

FATF also has one observer country i.e. Indonesia.

Note: India became FATF’s 34th member country in 2010. Before this, it had been a part of the boy as an Observer since 2006.

FATF ‘Grey List’ And ‘Blacklist’

FATF has 2 types of lists:

a.  Black List: Countries suspect of supporting terror funding and money laundering are identified as Non-Cooperative Countries or Territories (NCCTs) and are put in the Black List.

b. Grey List: Some countries through peer reviews are identified as safe haven for supporting terror funding and money laundering. Putting in the Grey list serves as a warning to these countries that it may enter the blacklist. 

Consequences of being in the FATF grey list:

Economic sanctions, Problem in getting loans from global financial institutions and other countries, threat to its international trade, prospects of international boycott