Financial Action Task Force

(FATF)
Hammad Raza
What Is the Financial Action Task Force
(FATF)?
• The Financial Action Task Force (FATF) is an intergovernmental
organization that designs and promotes policies and standards to
combat financial crime.
• Recommendations created by the Financial Action Task Force (FATF)
target money laundering, terrorist financing, and other threats to the
global financial system.
• The FATF was created in 1989 at the behest of the G7 and is
headquartered in Paris.
Understanding the Financial Action Task
Force (FATF)
• The rise of the global economy and international trade has given rise to financial crimes
such as money laundering.
• The Financial Action Task Force (FATF) makes recommendations for combating financial
crime, reviews members' policies and procedures, and seeks to increase acceptance of anti-
money laundering regulations across the globe. Because money launderers and others alter
their techniques to avoid apprehension, the FATF must update its recommendations every
few years.

• A list of recommendations to combat terrorist financing was added in 2001, and in the
latest update, published in 2012, the recommendations were expanded to target new
threats, including financing the spread of weapons of mass destruction. Recommendations
were also added to be clearer on transparency and corruption
• There are currently 39 members of the FATF; 37 jurisdictions and 2 regional organizations (the Gulf
Cooperation Council and the European Commission).
• To become a member, a country must be considered strategically important (large population, large
GDP, developed banking and insurance sector, etc.), must adhere to globally accepted financial
standards, and be a participant in other important international organizations.

• Once a member, a country or organization must endorse and support the most recent FATF
recommendations, commit to being evaluated by (and evaluating) other members, and work with
the FATF in the development of future recommendations.

• A large number of international organizations participate in the FATF as observers, each of which has
some involvement in anti-money laundering activities. These organizations include Interpol, the
International Monetary Fund (IMF), the Organization for Economic Cooperation and Development
(OECD), and the World Bank.
History.
• In response to mounting concern over money laundering, the
Financial Action Task Force on Money Laundering (FATF) was
established by the G-7 Summit that was held in Paris in 1989.
Recognizing the threat posed to the banking system and to financial
institutions, the G-7 Heads of State or Government and President of
the European Commission convened the Task Force from the G-7
member States, the European Commission and eight other countries.
FATF Recommendations

• The Task Force was given the responsibility of examining money

laundering techniques and trends, reviewing the action which had
already been taken at a national or international level, and setting out
the measures that still needed to be taken to combat money
laundering.
• In April 1990, less than one year after its creation, the FATF issued a
report containing a set of Forty Recommendations, which were
intended to provide a comprehensive plan of action needed to fight
against money laundering
Continued…
• n 2001, the development of standards in the fight against terrorist
financing was added to the mission of the FATF. In October 2001 the
FATF issued the Eight Special Recommendations to deal with the issue
of terrorist financing.
• The continued evolution of money laundering techniques led the FATF
to revise the FATF standards comprehensively in June 2003.
• In October 2004 the FATF published a Ninth Special
Recommendations, further strengthening the agreed international
standards for combating money laundering and terrorist financing
Continued..
• In February 2012, the FATF completed a thorough review of its
standards and published the revised FATF Recommendations. This
revision is intended to strengthen global safeguards and further protect
the integrity of the financial system by providing governments with
stronger tools to take action against financial crime. They have been
expanded to deal with new threats such as the financing of
proliferation of weapons of mass destruction, and to be clearer on
transparency and tougher on corruption.
• The 9 Special Recommendations on terrorist financing have been fully
integrated with the measures against money laundering. This has
resulted in a stronger and clearer set of standards.
What as FATF 'grey list' and 'blacklist'?
• FATF has 2 types of lists:
• Black List: Countries knowns 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.

• Grey List: Countries that are considered safe 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.
FATF & Pakistan
• Pakistan has been in the FATF grey list since June 2018 and has been
asked to implement the FATF Action Plan fully by September 2019. It
was in the same category from 2012 to 2015 too.
• Pakistan's inclusion in the grey list can be attributed to the fact that
the country's anti-terror laws are still not in line with FATF standards
and also with the latest UN resolution 2462 that pitches for
criminalizing terrorist financing. What Pakistan has mostly done in the
past is detain both Masood Azhar and Hafiz Saeed for 'apprehension'
of breach of peace. The FATF seeks freezing of funds, denial of
weapons access and travel ban.
Status of Pakistan.

Largely Partially Incomplet No

Addressed Addressed e consensus

Jan 2019 1 1 25 -
Jun 2019 2 12 12 1
Oct 2019 5 17 5 -
Feb 2020 14 11 2 -
Oct 2020 21 6 - -
Feb 2021 24 3 - -
Consequences of being in the FATF grey list:
• Considered in the grey list may face
• Economic sanctions from IMF, World Bank, ADB
• Problem in getting loans from IMF, World Bank, ADB and other
countries
• Reduction in international trade
• International boycott