The Paris-based Financial Action Task Force (FATF) on October 21 removed Pakistan from a list of countries under “increased monitoring”. Nicaragua has also been removed from this monitoring.
Key points
- THE FATF “increased monitoring’ is also known as the “grey list”.
- Now 23 countries remain under this list. Among these countries are the Philippines, Syria, Yemen, the United Arab Emirates, Uganda, Morocco, Jamaica, Cambodia, Burkina Faso, and South Sudan, and the tax havens of Barbados, Cayman Islands, and Panama.
- The Financial Action Task Force (FATF) is an inter-governmental body that works to ensure that the flows of money in the global financial system are not misused to fund terrorist activities.
- FATF works to “set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system”.
- The FATF has developed the FATF Recommendations, or FATF Standards, which ensure a co-ordinated global response to prevent organised crime, corruption and terrorism. They help authorities go after the money of criminals dealing in illegal drugs, human trafficking and other crimes. The FATF also works to stop funding for weapons of mass destruction.
- The FATF reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks, such as the regulation of virtual assets, which have spread as cryptocurrencies gain popularity. The FATF monitors countries to ensure they implement the FATF Standards fully and effectively, and holds countries to account that do not comply.
- FATF maintains a “grey list” of countries that it watches closely. In essence, these are countries that have, in the assessment of the FATF, failed to prevent international money laundering and terrorist financing, and are, therefore, on a global watchlist for bad behaviour.
- FATF calls these countries “jurisdictions under increased monitoring”. Basically, these countries have to comply with certain conditions laid down by the FATF, failing which they run the risk of being “black listed” by the watchdog.
- According to the FATF, when a jurisdiction is placed under increased monitoring, “it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to extra checks”.
- Specifically, these jurisdictions are now “actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing”.
- The grey-listing negatively impacts the relationship of the concerned countries with international funders including banks and financial institutions that take note of FATF rankings, as well as existing and potential overseas investors in those countries.
