About FATF: (Financial Action Task Force)
- The FATF is an inter-governmental body that works 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.
- It was founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. In 2001, its mandate was expanded to include terrorism financing.
- The FATF holds three Plenary meetings during each of its 12-month rotating presidencies. The FATF has released the outcomes of its Plenary held in Paris under the German Presidency of Dr. Marcus Pleyer from October 19-21, 2021.
- Its Secretariat is located at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris.
FATF has two lists:
- Grey List: Countries that are considered 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. “Increased monitoring list” is another name for the ‘Grey List’.
- Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put in the blacklist. These countries support terror funding and money laundering activities. The FATF revises the blacklist regularly, adding or deleting entries. Iran and North Korea are the only two countries on the black list.
INCREASED MONITORING
- According to the FATF, when a jurisdiction is placed under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to extra checks.
- Specifically, these jurisdictions are now actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. This list of jurisdictions is commonly referred to as the “grey list”.
There are now 23 countries in the FATF grey list, officially referred to as “jurisdictions with strategic deficiencies”.
WHY TURKEY has been put in the Grey List?
FATF President Pleyer told a news conference that Turkey needs to address “serious issues of supervision” in its banking and real estate sectors, and with gold and precious stones dealers, Reuters reported. “Turkey needs to show it is effectively tackling complex money laundering cases and show it is pursuing terrorist financing prosecutions and prioritizing cases of UN- designated terrorist organisations such as ISIL and al Qaeda,” Pleyer said.
The FATF has given eight specific tasks to Turkey.
(i) dedicating more resources to the supervision of AML/CFT compliance by high-risk sectors and increasing on-site inspections.
(ii) applying “dissuasive sanctions” for breaches of AML/CFT, including unregistered money transfers.
(iii) enhancing use of financial intelligence to support money laundering investigations.
(iv) undertaking more complex money laundering investigations and prosecutions.
(v) fixing responsibilities and measurable performance objectives for anti-terror finance authorities.
(vi) conducting more financial investigations in terrorism cases.
(vii) concerning targeted financial sanctions under the UN’s anti-terror resolutions, and pursuing actions against UN-designated groups; and
(viii) implementing a risk-based approach to supervision of non-profit organisations to prevent their abuse for terrorist financing.
What is Turkey’s Response to the Listing?
- While agreeing to comply with the requirements of the FATF, of which it is a member, the Turkish Treasury complained that despite our work on compatibility, placing our country on the grey list is an undeserved outcome. In the coming period, necessary measures will continue to be taken in cooperation with FATF and all relevant institutions, to ensure that our country is removed from this list, which it does not deserve, as soon as possible, it said in a statement.
- The Reuters report recalled that FATF had warned Turkey in 2019 about “serious shortcomings” including the need to improve measures to freeze assets linked to terrorism and weapons of mass destruction proliferation.
Why Pakistan is still in Grey List: -
- THE FINANCIAL Action Task Force (FATF) has refused to take Pakistan out of the ‘Grey List’ yet again as it needs to “further demonstrate” that action is being taken against UN-designated terrorists like India’s most wanted Hafiz Saeed and Masood Azhar, and groups led by them, the global body against terror financing said. FATF requires it to demonstrate terror financing investigation and prosecution of leaders and commanders of UN-designated terrorist groups and their associatess.
Impact on Pakistan:
- By remaining on the “Grey List”, it would be difficult for Pakistan to get financial aid from the International Monetary Fund (IMF), World Bank and European Union, making its financial condition more precarious. Unlike the next level “blacklist”, greylisting carries no legal sanctions, but it attracts economic strictures and restricts a country’s access to international loans.
The FATF also took two countries — Botswana and Mauritius — out of the grey list. These jurisdictions no longer subject to increased monitoring have made significant progress addressing the strategic AML/CFT deficiencies identified earlier by the FATF and included in their respective action plans.
- AML/CFT refers to “Anti-Money Laundering/Combating the Financing of Terrorism”. “Both countries will no longer be subject to the FATF’s increased monitoring process.
- This development, feel many experts, would indirectly impact the foreign investment from Mauritius to India. “The foreign direct investment into India from Mauritius had declined during the financial year April 2020-March 2021 after Mauritius was subjected to increased monitoring by the FATF.
Source: Indian Express
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