Day 54 – Q 2.What does FATF stand for? What is its mandate? India has received some success on this forum recently. Can you discuss that?

2. What does FATF stand for? What is its mandate? India has received some success on this forum recently. Can you discuss that? 

एफएटीएफ क्या है? इसका जनादेश क्या है? भारत को हाल ही में इस मंच पर कुछ सफलता मिली है। क्या आप उस पर चर्चा कर सकते हैं?

Introduction:

FATF stands for The Financial Action Task Force. It was established in July 1989 by a Group of Seven (G-7) Summit in Paris, initially to examine and develop measures to combat money laundering. The FATF Secretariat is housed at the OECD headquarters in Paris. 

Body: 

FATF mandate: 

In October 2001, the FATF expanded its mandate to incorporate efforts to combat terrorist financing, in addition to money laundering.  In April 2012, it added efforts to counter the financing of proliferation of weapons of mass destruction.

The Financial Action Task Force (FATF) defines its mandate as to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and proliferation of weapons of mass destruction and other related threats. They form the basis for a coordinated response to these threats to the integrity of the financial system and help ensure a level playing field.  

The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally.  In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse. The FATF is, therefore, a ‘policy-making body’ which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.

India and the Financial Action Task Force (FATF): 

India became a member of the Financial Action Task Force (FATF) in 2010. FATF membership is very important for India in its quest to become a major player in international finance. It will help India to build the capacity to fight terrorism and trace terrorist money and help to successfully investigate and prosecute money laundering and terrorist financing offences. India will benefit from securing a more transparent and stable financial system by ensuring that financial institutions are not vulnerable to infiltration or abuse by organized crime groups.

In recent past, Pakistan had asked for India’s removal from the group, citing bias and motivated action, but that demand was rejected. However, The Asia Pacific Group (APG) of the Financial Action Task Force (FATF) has put Pakistan in Enhanced Expedited Follow Up List (Blacklist) for its failure to meet its standards. This will benefit India in many ways, such as:

• Pakistan will be put under closer scrutiny immediately to curb terror financing. 
• Reduced Pakistan funded terrorist attacks and infiltrations such as Pulwama and Mumbai attacks.
• Economic benefits to India as FATF has increased the cost of doing business with Pakistan which will attract less FDI now.
• Enhanced image of India in international forums as Pakistan will face an international boycott.
• Pakistan’s already fragile economy will have a powerful blow which will be in India’s favour in international trade.

Conclusion: 

India also needs to strengthen its policy to curb money laundering and be vigilant about terror financing in lines with FATF. PMLA and FCRA are good steps in this direction.