Page 40 - Banking Finance April 2022

ARTICLE

Consequences for black list countries Achievements of FATF

Firms, organisations and nations are called upon to apply Y Raised international awareness towards state and
counter measures to protect the International Financial institutional funding
system from the ongoing money laundering, terror financing Y Push for non-profit organization (NPOs) for more
and proliferation financing risks emanating from the financial transparency to make sure that they do not
blacklisted country. become easier for terrorist organisations to launder
money through the organizations.
A jurisdiction placed on the FATF black list often found itself
under intense financial and diplomatic pressure which has a Y Harmonisation of legislation and enforcement efforts
through effective checks and coordination against
crippling effect on the economy.
money laundering and terrorism financing.
Grey List Y Flexibility in response to new threats like use of crypto
currencies for money laundering.
A country is placed under the FATF Grey list. It means the
country has committed to resolve swiftly the identified
strategic deficiencies within agreed time frames and is Challenges in FATF's functioning:
subject to increased monetary supervision. This inclusion Y Nearly two-thirds of countries assessed are still not
serves as a warning to the country that it may enter the taking effective action to investigate and prosecute
blacklist. terrorist financing.

Y No real power to punish states that do not comply with
This list is often externally referred to as the grey list. their standards.
Pakistan has been on the FATF's grey list since June 2018.
Consequences for grey listed countries. Problems in getting Y Fears of becoming hostage to International political
loans from IMF, World Bank, ADB and other countries. NGOs rivalries.
and businesses in such countries find it difficult to access Y The present categorisation of lists - grey and black- may
funds due to strict FATF criteria reduction in international be too rigid to effectively address the challenges of
trade and set back to diplomatic prestige. terror financing and money laundering.
Y The grey list has very low economic or political cost as
Now looking at the relationship between India and FATF.
compared to the blacklist which has lead to a high
India became an observer at FATF in 2006. In 2010, India
threshold and barrier in taking effective action capacity
was taken in as the 34th country member of FATF. Recent
reforms and actions undertaken by India in line with the constraints of countries and inadequate operational
objectives of FATF include resources and assessment complexities in the
implementation of FATF standards.
Y Anti Black Money Act 2015,
Y Fugitive Economic Offenders Act, 2018,
Following measures are suggested to
Y Amendments brought in the prevention of money make FATF more effective.
Laundering Act, ( PMLA ) over the years,
Y There is a need for more gradations between the grey
Y Enactment of the GST ( Goods and Services Tax ),
and the blacklist as it may increase policy options and
Y New protocols to better regulate suspect transactions leverage.
in banks and financial intermediaries
Y More needs to be done in terms of regulatory
Y Demonitisation of 2016, enforcement mechanisms than another 'name and
shame' list.
In India, the Enforcement Directorate ( ED) is the nodal
agency to undertake investigations under the PMLA and Y New approach of measuring effectiveness rather than
FATF conducts a review of India's anti-money anti money technical compliance to the recommendations needed.
laundering and terrorist financing regime as part of regular Y More international cooperation is needed to strengthen
review cycle. FATF's operational resources and efficiency. T

40 | 2022 | APRIL | BANKING FINANCE