FATF Current Affairs - 2019

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Sri Lanka removed from FATF’s Grey List

Sri Lanka has been removed from ‘Grey List’ of Financial Action Task Force (FATF) following the new measures taken by the country on financial security. The word ‘Grey List’ identified by FATF refers to a jurisdiction with strategic Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) deficiencies.

Key Highlights

The announcement regarding removal of Sri Lanka’s name from the list of countries at risk for money laundering was made by Sri Lankan Minister of Finance Mangala Samaraweera, after a 5-day FATF plenary concluded in Paris, France.

FATF, the international terror financing watchdog, noted that Sri Lanka set out a sound framework to bring the commitment of all stakeholders for enhancing AML/CFT standards in order to improve compliance and country rating.

Background

Sri Lanka was first included in FATF’s blacklist in 2011, and by 2012, Sri Lanka was listed in the list as a dangerous country with no commitment to financial security plan.

Later in October 2016, FATF subjected Sri Lanka to a review of FATF’s International Cooperation Review Group (ICRG) for assessing the progress of AML/CFT effectiveness in country.

However, since 2016, Sri Lankan government together with country’s Central Bank and other financial institutions has taken several measures to ensure the financial security of country. As a result these efforts, Sri Lanka was declared a cooperating state in 2016 and FATF putted Sri Lanka on its grey list from November 2017. The island nation has reported the progress achieved in the implementation of action plan regularly to FATF.

What is Financial Action Task Force (FATF)?

It is a Paris (France) based inter-governmental organisation established in 1989.

It is the international terror financing watchdog that combats terrorist financing, money laundering as well as other related threats to integrity of international financial system.

FATF Plenary meet: Pakistan to be scrutinized

The six-day plenary meeting of FATF – Financial Action Task Force is to be held in Paris. It is a part of the FATF Week that is being celebrated between October 13 and October 18, 2019. The meeting is attended by representatives from 205 countries and jurisdictions all around the world. It includes IMF, UN, World Bank and other leading organizations. The meeting will focus on financial flows that are linked to terrorism and crime.

The China Factor in the Meet

It is the first Plenary meeting under the Presidency of China. Among the important factors to be discussed in the meet the progress by Pakistan, Iran and other countries that present risk to the financial system is highly crucial, especially for China. This is because, Pakistan being an all-weather ally of China, all eyes are to be focused on China.

In the June Plenary meet, Pakistan received 3 needed votes from China, Turkey and Malaysia. This prevented the country from entering the blacklist.

India, UK and USA want Pakistan to be included in FATF Black list while China and Turkey are against the move.

FATF on Pakistan

The countries are recommended to the blacklist category based on the Mutual Evaluation Report. According to the report published in 2019, of 10 effective ratings, Pakistan was found low in 9 areas.

In its money laundering report, 2019, FATF slammed Pakistan for its terror funding.

Plenary meet

The FATF plenary year begins in July and ends in June. Every year, the FATF holds three plenary meetings. They usually take place in October, June and February. This October the following discussions are to be made in the plenary meet

  • To assess if the countries are regulating virtual asset sector to prevent misuse of crime and terror
  • To assess Russia and Turkey measures to combat money laundering
  • To discuss the impact of “stable coins” on the supervision of virtual assets
  • Actions taken by Ireland, Denmark, Norway, Singapore, Spain and Saudi Arabia since their assessments
  • Developments in financing of Al – Qaeda, ISIL and Affiliates

FATF Blacklist

The FATF black list or the OECD black list is issued by the FATF since 2000. Such description is given to those countries that are non – cooperative in the global fight against money laundering and terrorist financing. The FATF is updated regularly.

Current South Korea and Iran are in the FATF Blacklist category.

FATF Grey list

The FATF Grey list comprises of those countries that have flaws in their financial regulation. The countries that are currently under FATF grey list are Bahamas, Botswana, Cambodia, Ethiopia, Ghana, Pakistan, Panama, Sri Lanka, Syria, Trianidad and Tobago, Tunisia and Yemen

Pakistan was added to the Grey list category in 2012 and later was removed from the list in 2015. However, in 2018 it was again added to the grey list category.