What is FATF ?

The Financial Action Task Force (FATF) is an inter-governmental policymaking group whose mission is to set international standards and to promote and protect financial stability on a national and worldwide scale develop policies to combat money laundering as well as terrorism financing.

The intergovernmental organizations establish worldwide standards with the goal of preventing unlawful actions and the harm they do to society. The FATF, as a policy-making body, works towards building the political will, which is required to bring not only national legislatures but also regulatory reforms in these areas. 

With almost 200 nations and jurisdictions pledging to adopt them. The FATF created the FATF Recommendations, often known as the FATF Standards, to enable a coordinated worldwide response to organized crime, corruption, and terrorism. They assist police in pursuing the assets of criminals involved in illegal narcotics, human trafficking, and other crimes.

The FATF also seeks to prevent the financing of weapons of mass devastation.

The FATF examines money laundering and terrorist funding strategies and regularly develops its standards to handle emerging dangers, such as the regulation of virtual assets, which has increased as cryptocurrency use has grown. The FATF monitors nations to ensure that the FATF Standards are completely and effectively implemented, and holds noncompliant governments accountable.

Objectives of FATF

The objectives of the FATF are to provide guidelines and encourage the proper application of legal, regulatory, and operational measures and policies to combat money laundering, terrorist funding, and other risks to the international financial system’s integrity.

As a result, the FATF’s objectives can be summarized as follows:

1. Establishing standards and encouraging the proper application of legal, regulatory, and operational measures and developing policies for combating money laundering
2. The FATF identifies national-level vulnerabilities in order to protect the international financial system from misuse.

History of the FATF

In response to growing concern over money laundering, the G-7 Summit in Paris in 1989 formed the Financial Action Task Force on Money Laundering (FATF).

Recognizing the threat to the banking system and financial institutions, the G-7 Heads of State or Government and the President of the European Commission formed the Task Force, which included representatives from the G-7, the European Commission, and eight additional nations.

FATF Grey List

Nations considered safe havens for terrorist funding and money laundering are placed on the FATF Grey list. This inclusion acts as a cautionary note to the country that it may be added to the blacklist.

As a result of being on the FATF grey list, the considered may incur the following consequences:

1.   Economic restrictions imposed by the IMF, World Bank, and ADB
2.   Difficulties obtaining loans from the IMF, World Bank, ADB, and other countries
3.   International trade reduction
4.   International boycott

Domain of FATF

The domain of FATF can be explained as follows:

• Along with its 39 members, the FATF Recommendations, depend strongly on a global network of FATF- Style Regional Bodies, to achieve the FATF Recommendations’ global implementation. 
• More than 200 jurisdictions all across the globe have devoted themselves to the FATF Recommendations through the global network of the memberships of FSRBs and FATF. 

The 39 members which form a part of the Domain of FATF are:

Australia, Argentine, Austria, Brazil, Belgium, China, Canada, Denmark, European Commission, Finland, France, Germany, Greece, Gulf Cooperation Council, Hong Kong, Iceland, India, Ireland, Israel, Italy, Japan, Republic of Korea, Luxembourg, Malaysia, Mexico, Netherlands, Norway, New Zealand, Portugal, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, United Kingdom and United States.

Conclusion

The Financial Action Task Force (FATF) is a policy making group and is also inter-governmental, whose mission is to set international standards and to promote and protect financial stability on a national and worldwide scale develop policies to combat money laundering as well as terrorism financing It was established in 1989 to outline the steps to be taken in the fight against money laundering. FATF has published 40 recommendations to combat money laundering and 9 specific recommendations to combat terrorism funding since then.FinCEN looks after the Department of the Treasury, in its efforts to encourage the adoption of international anti-money laundering and counter-terrorism financing (AML/CFT) standards, particularly through the FATF, where FinCEN led the delegation from 1994 to 1998. The FATF now has 32 member nations and territories, as well as two regional organizations. FATF-like regional bodies, known as FATF Style Regional Bodies, have also emerged.