The Financial Action Task Force

The Financial Action Task Force (FATF) is a monitoring body. It was formed in 1989 as an intergovernmental body at the initiative of the G7. The Secretariat of the FATF is located at the headquarters of the Organization for the Development of Economic Cooperation (OECD) in Paris, France, which works to monitor countries. In the beginning, smuggling of drugs, gold etc., countries whose help is taken to hide taxes, were kept under watch. But after the 9/11 attacks, its work changed to a great extent. Since then terrorism has also been considered as a big problem and the FATF also started keeping an eye on countries that promote terrorism and provide economic support.

In addition, FATF promotes the effective implementation of legal, regulatory and operational measures on the subject of finance.  The decision-making body of the FATF is called the FATF Plenary.  Its meeting is held three times in a year.

How FATF Works

FATF has its own scale to measure whether a country is promoting terrorism or not, preventing wrong activities or not. Some 40 points have been fixed by which a country is measured. There are 39 members in FATF. It has 37 countries and two regional organizations.  There are also organizations that work against money laundering.

There are three categories of FATF. First White List, means no work is being done in your country promoting smuggling, terrorism.The second is the Gray List. It has two parts. First those countries which are heaven for tax evasion. Like Bahamas, Panama etc. In the second part of the Gray List are those countries that work to promote terrorism and provide economic support. Black List means that a terrorist organization is being funded from a country and it is not taking the action it should, then its name is put in the 'Black List'.

What happens after being on the FATF Black and Gray List?

On going to the Gray List, it is difficult for a country to get money from institutions like IMF, World Bank. It is difficult to get loans. Problems arise in international trade. 

On the other hand, If a country is put in the Black List, then the economy of that country has to face difficulties. Other countries stop investing in that country, as well as the country stops getting international economic cooperation. Blacklisted countries find it difficult to get loans from international institutions such as the World Bank, the International Monetary Fund, the Asian Development Bank (ADB) and the European Union. Apart from this, rating companies such as Moody's, Standard & Poor's and Fint can also reduce its rating.

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