Financial Action Task Force

Financial Action Task Force is a global body that gives recommendations concerning financial crime and aims at increasing adherence to anti-money laundering regulations across the world anti-money laundering (AML) and countering financing of terrorism (CFT). It sets certain standards to prevent criminal financing, anti-proliferation concerning weapons of mass destruction, and money laundering.

FATF conducts plenary meetings every year to identify countries with significant lacunae in fighting money laundering, proliferation financing and terrorist funding to place them on the Black List. Further, it lists these countries in its Grey List that have committed to rectifying these lacunas and need enhanced monitoring. Peer countries, the International Monetary Fund, the World Bank and 9 FATF-Style Regional Bodies carry out FATF evaluation using financial and legal experts. 

Black lists and grey lists come in handy to FATF partner organizations, market actors, international organizations and developed nations in deciding to stop or continue funding countries not complying with FATF standards of AML/CFT. In the financial world, FATF's grey-listing has reduced 10% of payment transactions, indicating a huge impact. Besides, one notices a 5% reduced investment to countries included in its blacklist. 

It has multifaceted functions to prevent financial crimes like the ones listed below:

• FATF takes the lead in global action to manage terror funding, money laundering, and proliferation financing. 
• It researches ways money laundering and terror funding take place while promoting global standards to mitigate the risk and examining whether the countries are acting accordingly. 
• FATF regularly tracks the methods in which criminals operate to raise, utilize and transfer funds globally, accompanied by reports publishing about the same.
• It continues to set & strengthen international frameworks and standards on money laundering and terror funding and updates them to thwart corruption, organized crime and terrorism.
• With the help of global partners and its 9 regional FATF Associate Member organizations, they evaluate whether nations have implemented FATF standards effectively or not. 
• They identify nations that do not implement FATF standards and hold them accountable by naming them under various categories like High-Risk Jurisdictions (financial action task force blacklist) & Jurisdictions under Increased Monitoring (financial action task force grey list).

The gist of the financial action Task Force 40 recommendations include:

• Establish a robust legal system that criminalizes money laundering and terror financing, identifies traces and freezes assets used for money laundering.
• Financial institutions must implement customer due diligence to monitor and report suspicious transactions and identify and verify customer details.
• Nations must set up rules to tackle the financing of terrorism while also criminalizing terrorist financing and executing targeted financial sanctions.  
• State authorities must increase international cooperation using information exchange to assist other nations in AML/CFT cases.
• All non-financial businesses and professions (DNFBPs) and financial institutions must be monitored carefully to ensure AML/CFT regulations adherence.
• All nations must proactively implement procedures to confiscate and seize assets concerning terrorist financing and money laundering.
• All nations must involve their financial intelligence units (FIUs) in effectively collecting, analyzing, and disseminating financial intelligence to fight money laundering and terror funding. 
• Beneficial ownership and enhanced transparency disclosure must established to stop the misuse of legal arrangements and persons towards illegal means.

Financial action task force countries can be deciphered as per the official website of the FATF. It shows that it has created a strong mesh of 9 FATF-Style Regional Bodies (FSRBs) globally besides its 39 members. 9 FSRBs have been promoting efficient execution of its recommendations through its members, complementing them with knowledge offering and input within FATF-policy creations. It has more than 200 jurisdictions globally complying with FATF recommendations. 98 countries have been publicly listed as FATF countries, within which 72 countries have adapted to the FATF recommendations by addressing the weaknesses of AML/CFT.

Although FATF has played a crucial role in curbing money laundering and criminal financing globally, it has been criticized, as shown below:

• Many governments have misused it to suppress rights activists and anti-corruption voices. 
• Most of the time, non-profit organizations and non-governmental organizations have suffered at the hands of local governments for money laundering.
• It has also put a stigma on civil society groups as a base of illegal funding. 
• It is said that most of the criticism has been acknowledged by the FATF and is being looked into the potential misuse.
• Its effectiveness has been questioned over actual funding to terrorist groups.
• Weak democratic countries have often misused it against lawyers, journalists to silent critics of the government in power. 
• Some countries may use it as an international political tool to push another country into FATF's grey list.
• FATF also comes with a lack of transparency in policy-making and decision-making procedures, leading to biased outcomes.