Role of FATF in Global Financial Integrity

What is FATF?

The Financial Action Task Force (FATF) is an intergovernmental organization established in 1989, dedicated to combating money laundering and terrorist financing worldwide. With 37 member states, the FATF sets international standards designed to prevent illegal activities within the financial sector.

To achieve its objectives, the FATF issues recommendations that function as globally accepted standards. These guidelines assist national authorities in implementing necessary legal, regulatory, and operational measures to combat money laundering, terrorist financing, and other financial threats.

Through a comprehensive process of mutual evaluations, the FATF assesses the effectiveness of its members in executing these measures. The organization is headquartered in Paris.

FATF and India

India became a full member of the FATF in 2010, subject to periodic mutual evaluations designed to assess its adherence to international standards for preventing money laundering and terrorist financing. This membership has significant implications for India's financial regulatory framework.

Current Issues with NGOs and FATF Reports

Recently, Amnesty International reported that Indian authorities are allegedly misusing FATF recommendations to target civil society groups and activists. According to Amnesty, these recommendations are being weaponized to implement stringent laws that hinder the non-profit sector's operations in India.

This controversy arises ahead of India's fourth round of mutual evaluation by the FATF. Critics argue that the Indian government is exploiting these international standards as a means to suppress dissent and must be held accountable for such misuse.

Frequently Asked Questions (FAQs)

Q1. What is the primary purpose of FATF?
Answer: The FATF aims to combat money laundering and terrorist financing by setting international standards and promoting effective implementation of legal measures among its member states.

Q2. How does FATF evaluate its member countries?
Answer: The FATF conducts mutual evaluations to assess the compliance of member countries with its recommendations, focusing on the effectiveness of their measures against financial crimes.

Q3. Why is India under scrutiny by the FATF?
Answer: India is monitored by the FATF to ensure compliance with international standards for preventing money laundering and terrorist financing, which includes periodic evaluations of its legal frameworks.

Q4. What concerns have NGOs raised regarding FATF recommendations in India?
Answer: NGOs, including Amnesty International, allege that Indian authorities misuse FATF recommendations to impose restrictions on civil society, undermining their operations and stifling dissent.

Q5. How many countries are members of the FATF?
Answer: The FATF comprises 37 member countries, each working together to enhance financial integrity and combat illicit financial activities globally.

UPSC Practice MCQs

Question 1: What year was the FATF established?
A) 1985
B) 1989
C) 1992
D) 2000
Correct Answer: B

Question 2: How many member countries are part of the FATF?
A) 25
B) 30
C) 37
D) 40
Correct Answer: C

Question 3: What is one of the main criticisms of the FATF's recommendations in India?
A) They promote financial inclusion
B) They are misused against NGOs
C) They enhance transparency
D) They support economic growth
Correct Answer: B

Question 4: Where is the FATF headquartered?
A) London
B) Washington D.C.
C) Paris
D) New Delhi
Correct Answer: C

Question 5: What is the function of mutual evaluations by the FATF?
A) To provide financial aid
B) To assess compliance with standards
C) To sanction member countries
D) To promote trade
Correct Answer: B

Question 6: In which year did India join the FATF?
A) 2005
B) 2010
C) 2015
D) 2020
Correct Answer: B

Question 7: What issue has been highlighted regarding the FATF's role in India?
A) Economic growth
B) Environmental protection
C) Targeting of civil society
D) Educational reforms
Correct Answer: C