The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. The inter-governmental body sets international measures that aim to prevent these illegal activities and the harm they cause to society. As a policy-making body, the FATF works to develop the essential political will to bring about national legislative and regulatory reforms in these areas.
With more than 200 countries and jurisdictions dedicated to implementing them. The FATF has designed the FATF Suggestions, or FATF Standards, which ensure a coordinated global response to prevent organized crime, corruption, and terrorism. They help authorities go after the money of criminals dealing with unfair 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 does not comply.
What are the duties of FATF?
The Financial Action Task Force (FATF) 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.
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.
Since its inception, the FATF has operated under a fixed lifespan, requiring a specific decision by its Ministers to continue. Three decades after its, creation, in April 2019, FATF Ministers adopted a new, open-ended mandate for the FATF.
The objectives of the FATF are 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. Starting with its own members, the FATF monitors countries’ progress in implementing the FATF Recommendations; reviews money laundering and terrorist financing techniques and counter-measures; and, promotes the adoption and implementation of the FATF Recommendations globally.
The FATF’s decision-making body, the FATF Plenary, meets three times per year.
History of the FATF
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 the President of the European Commission convened the Task Force from the G-7 member States, the European Commission, and eight other countries.
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.
In 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 Recommendation, further strengthening the agreed international standards for combating money laundering and terrorist financing – the 40+9 Recommendations.
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 is the current position of Pakistan?
All eyes are on the Financial Action Task Force’s (FATF) plenary meeting concluding today (Friday), with Pakistan having high hopes to secure an ‘onsite visit’ which may lead Islamabad a step closer to getting out of the grey list.
The announcement of the meeting’s outcome is expected after 8 pm following a delay.
Minister of State for Foreign Affairs Hina Rabbani Khar Friday advised against prejudging and speculative reporting on the FATF meeting’s outcome.
Taking to Twitter, the minister said that the plenary meetings are underway and the FATF will issue a public statement after concluding the meetings tonight.
She further stated that the government has arranged a media briefing at the Ministry of Foreign Affairs on Saturday.
“The FATF Plenary Meetings are continuing in Berlin. FATF will issue a Public Statement after the conclusion of the meetings tonight. Prejudging the outcome of speculative reporting could and should be avoided. Government of Pakistan has arranged a media briefing at MOFA on Saturday morning on this issue,” Khar wrote.
The #FATF Plenary Meetings r continuing in Berlin. FATF will issue a Public Statement after conclusion of the meetings tonight. Prejudging the outcome or speculative reporting could and should be avoided.
GOP has arranged a media briefing at MOFA on Saturday morning on this issue
— Hina R Khar (@HinaRKhar) June 17, 2022
Earlier, a government official said in a conversation with the BBC that the recent updates on the plenary meeting show good signs of a decision in Pakistan’s favor.
He said that the consent and consolation of other countries in the meeting is also significant.
However, he said that matters will take seven to eight months to settle even if Pakistan makes its way out of the watch list as the FATF team will visit Pakistan for an inspection.
Sources said that the FATF had directed Pakistan to fulfill 34 conditions in two stages, which Pakistan accomplished. The country fulfilled 32 out of 34 conditions in the last FATF meeting and completed the remaining two in this meeting.
They said that the final decision could be delayed till the next FATF meeting scheduled to take place in Paris in October.
Pakistan had launched a massive diplomatic effort to get off the FATF grey list. Khar, who is also the chair of Pakistan’s National FATF Coordination Committee, is leading the Pakistan delegation at the plenary meeting that started on June 14.
Pakistan needs the votes of Turkey, China, and Malaysia to get off the list, and all three countries have assured the Pakistani authorities of full support. That’s why there are now bright chances that Pakistan may finally exit the FATF grey list after its current meeting being held in Berlin, Germany.
Germany, the US, and other countries have also expressed partial support for Pakistan’s demand for exclusion from the FATF grey list.
According to sources, during the recent visits of Prime Minister Shehbaz Sharif, Foreign Minister Bilawal Bhutto Zardari, and Minister of State for Foreign Affairs Hina Rabbani Khar to different countries, important discussions took place regarding FATF. In all these meetings, a soft attitude towards Pakistan was expressed by important countries.
Pakistan has implemented almost all points of the FATF Action Plan, except for the penalties, and Pakistan has made prosecutions and all relevant legal amendments.
Pakistan was placed on the FATF list of countries under increased monitoring in June 2018.