FATF Mutual Evaluation Report

- The Financial Action Task Force (FATF) is an intergovernmental organization that designs and promotes policies and standards to combat financial crime.
- The FATF sets standards or recommendations for countries to achieve in order to plug the holes in their financial systems and make them less vulnerable to illegal financial activities.
- Recommendations of the FATF target

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.
The decision-making body of the FATF, known as its plenary, meets thrice a year. Its decisions are taken by consensus.

At the end of every plenary meeting, FATF comes out with two lists of countries.
The grey list countries are designated as “jurisdictions under increased monitoring”, working with the FATF to counter criminal financial activities.
- For such countries, the watchdog does not tell other members to carry out due-diligence measures vis-a-vis the listed country but does tell them to consider the risks such countries possess. Currently, more than 20 countries such as Bulgaria, Cameroon, Democratic Republic of the Congo, Croatia, Philippines, South Africa, Vietnam, etc. are on the grey list.
Black list means countries designated as ‘high-risk jurisdictions subject to call for action’.
- In this case, the countries have considerable deficiencies in their AML/CFT (anti-money laundering and counter terrorist financing) regimens and the body calls on members and non-members to apply enhanced due diligence.
- In the most serious cases, members are told to apply counter-measures such as sanctions on the listed countries. Currently, North Korea, Iran and Myanmar are on the black list.
Being listed under the FATF’s lists makes it hard for countries to get aid from organisations like the International Monetary Fund (IMF), Asian Development Bank (ADB), and the European Union. It may also affect capital inflows, foreign direct investments, and portfolio flows.

The Financial Action Task Force (FATF) has released its Mutual Evaluation Report for India.
While India gained comfort from being placed in the regular follow-up category, the FATF flagged certain areas for improvement: the need to strengthen prosecution in money laundering (ML) and terror financing (TF) cases, protecting the non-profit sector from terrorist abuse, and supervision and implementation of preventive measures.

FATF Mutual Evaluation Reports:

The FATF monitors countries to ensure they implement the FATF standards fully and effectively.
FATF mutual evaluations are in-depth country reports that analyse the implementation and effectiveness of measures taken against money laundering, terrorist and proliferation financing.
The reports are peer reviews, where members from different countries assess another country. After an analysis of a country’s anti-money laundering and counter-terrorist financing system, mutual evaluations give recommendations to further strengthen a country’s system.

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