Financial Action Task Force (FATF)

About Financial Action Task Force (FATF)

• FATF is an inter-governmental policy-making and standard-setting body dedicated to combating money laundering and terrorist financing.
• Objective: To establish international standards and to develop and promote policies, both at national and international levels, to combat money laundering and the financing of terrorism.
• It makes recommendations for combating financial crime, reviews members' policies and procedures, and seeks to increase acceptance of anti-money laundering regulations across the globe.
• Formation:
  • It was established in 1989 during the G7 Summit in Paris to develop policies against money laundering.
  • In 2001, its mandate expanded to include terrorism financing.
• Headquarters: Paris, France.
• Membership:
  • FATF members include 39 countries, including the United States, India, China, Saudi Arabia, Britain, Germany, France, and the EU as such.
  • India became a member of FATF in 2010.
• FATF, as part of its efforts, maintains two types of lists - the greylist and the 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 on the FATF grey list.
  • This inclusion serves as a warning to the country that it may enter the blacklist.
  • Three countries, North Korea, Iran, and Myanmar, are currently in FATF’s blacklist.
• Consequences of being on the FATF blacklist:
  • No financial aid is given to them by the International Monetary Fund (IMF), the World Bank, the Asian Development Bank (ADB) and the European Union (EU).
  • They also face a number of international economic and financial restrictions and sanctions.

Q1) What is Money Laundering?

Money laundering is a complex and illegal process that involves making illicitly obtained money (often referred to as "dirty money") appear legal or "clean" by passing it through a series of financial transactions or activities. The primary purpose of money laundering is to obscure the true source of the funds and make them appear to have originated from legitimate sources. Money laundering is a criminal offense in most jurisdictions around the world.

Source: To tackle corruption, FATF considers binding rules on economic fugitives