Gray list of Financial Action Task Force (FATF)

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Grey list of Financial Action Task Force (FATF)

Grey list of Financial Action Task Force (FATF) Gray list of Financial Action Task Force (FATF), 27 feb 2021, करंट अफेयर्स, हिन्दी करंट अफेयर्स, अंतर्राष्ट्रीय संबंध, फाइनेंशियल एक्शन टास्क फोर्स (FATF)की ‘ग्रे लिस्ट’, फाइनेंशियल एक्शन

  • In its meeting, the Global Anti-Terrorist Watchdog, the Financial Action Task Force (FATF), has decided to keep Pakistan on the grey list until June 2021.

 

  • However, India made a lot of effort to put Pakistan on the blacklist due to providing financial assistance to terrorists.
  • This decision was taken by the FATF, in view of the country’s failure to fully comply with the 27-point action plan to counter terrorism.

Key points of the FATF meeting:

  • The FATF said that Pakistan needs to work on implementing the remaining three points out of the 27 points.
  • There is a need to demonstrate that, effective sanctions have been imposed as a result of terrorist funding lawsuit.
  • It is required to reassert the effective implementation of targeted financial sanctions against terrorists named in UN Security Council resolutions 1267 and 1373.

Background:

On February 14, 2019, more than 40 Central Reserve Police Force (CRPF) soldiers were killed in a suicide attack by militants in Pulwama, Kashmir, which was claimed by the Jaish-e-Muhammad, Pakistan-based organization. India had also prepared a report related to this incident. After this, FATF put Pakistan in the gray list in October 2020, and had decided that the FATF would not allow Pakistan to receive aid from the World Bank, Asian Development Bank, International Monetary Fund and the European Union.

India, being a member of the FATF, has repeatedly asked Pakistan to take necessary steps to prevent financial crimes and to follow international standards.

What will happen if listed in grey list?

  • Analysts say the inclusion of Pakistan in the FATF’s watch list would cause more damage to its economy and would make more difficult for foreign investors and companies to do business in that country.
  • Some financial institutions would like to avoid transaction with banks in Pakistan.
  • However, there is no direct legal implication of being put on the watch list of FATF but after this, regulatory bodies and financial institutions begin to investigate more, which in turn reduces trade and investment and, increases the transaction costs.

What is FATF?

  • FATF is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
  • The FATF Secretariat is located in the OECD Headquarters building in Paris.
  • It is a policy-making body whose job is to create political will for national legislative and regulatory reforms in various fields.
Objectives of FATF:

The FATF aims to set and promote standards for legal, regulatory and operational measures to prevent other actions such as money laundering, providing funds to terrorists and endangering the international financial system.

What is Black list and Gray List?

The FATF maintains two separate lists for countries. The first list includes those countries where there are malicious practices like money laundering, but they are committed to an action plan to overcome it. The second type of list is those countries which are not making enough efforts to remove these malpractices. Of these, the first list is called the grey list and the second is called the black list.

 

When a country becomes blacklisted, the FATF calls for other countries to do more vigilant business with the blacklisted country and complete restriction of the transaction if it is more needed.

 

Today, only two countries come under Blacklist – Iran and North Korea.  Seven countries are in the grey list, namely Pakistan, Sri Lanka, Syria and Yemen.

Source – The Hindu

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