Financial Action Task Force (FATF) explained.

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Financial Action Task Force (FATF)

Financial Action Task Force (FATF) is an inter-governmental policy-making body that aims at establishing international standards for combating money laundering, terror financing and other threats to the global financial system. The body was established in the year 1989 during the G7 Summit in Paris (France) to combat the growing problem of money laundering. It designs and promotes policies and standards to combat financial crime.

Details:

  • The FATF Secretariat is housed at headquarters of OECD in Paris, France.
  • It comprises over 39 member countries.
  • India is also a member of the Financial Action Task Force.

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To become a member of the FATF, 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.

The mandate of FATF:

  • FATF sets standards and promotes 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.
  • Initially, FATF was only dealing with developing policies to combat money laundering. But in 2001 its purpose was expanded to act against terrorism financing.
  • It has a ministerial mandate to establish international standards for combating money laundering and terror financing.

Functions performed by FATF:

FATF is involved in

  • Setting international standards for combating money laundering and terrorist financing.
  • Assessing and monitoring compliance with the standards of FATF
  • Conducting studies on terrorist financing and money laundering trends, techniques and methods.
  • Responding to new and emerging threats, such as the proliferation financing used for promoting proliferation of nuclear, biological and chemical weapons.

The internationally endorsed global standards for implementing effective Anti-Money Laundering (AML/CFT measures given out by FATF increase the transparency of the financial system (making it easier to detect criminal activity) and give the countries, the capacity to successfully take action against money launderers and terrorist financiers.

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