About Financial Action Task Force (FATF):

• It is an intergovernmental organization that designs and promotes policies and standards to combat financial crime.
• Recommendations of the FATF target
  • Money laundering
  • Terrorist financing
  • Other threats to the global financial system
• The FATF was created in 1989 by the G7 countries, and is headquartered in Paris.
• There are 37 members, including India and two regional organisations – European Commission and the Gulf Cooperation Council.

Grey list FATF:

• Member countries that have deficiencies in their anti-money laundering and counter terrorist financing (AML/CTF) regimes but they commit to an action plan to address these loopholes.
• Currently, there are 18 countries on the grey list, including Mauritius and Pakistan.

Black list FATF:

• Member countries that have deficiencies in their anti-money laundering and counter terrorist financing (AML/CTF) regimes and do not end up doing enough.
• As of now there are only two countries in the blacklist — Iran and North Korea.
• While greylist includes countries which are considered as safe havens for supporting terror funding and money laundering, blacklisting will mean severe strictures on the countries banks and credit rating, as well as access to loans and foreign investments.
• Pakistan has been under the FATF’s scanner since 2018, when it was put on the greylist for terror financing and money laundering risks.

Asia Pacific Group of FATF

• The Asia Pacific Group (APG), one of the nine regional affiliates of FATF, has placed Pakistan in the “enhanced expedited follow-up list” (also known as the blacklist) for terror financing.
• While the two processes are separate, the APG blacklisting impairs Pakistan’s chances at extricating itself from the FATF greylist.

Why in News?

• Noting that Pakistan’s measures against money laundering and terror financing is not yet sufficient to justify a re-rating, the Asia-Pacific Group of FATF retained the country on its ‘enhanced follow-up’ list.
• Pakistan has improved its full compliance on only two of the 40 FATF recommendations, the APG noted.

Reference:

1. https://www.thehindu.com/news/international/pakistan-action-on-terror-funding-insufficient/article32837555.ece