FATF — Financial Action Task Force

The Financial Action Task Force (FATF) is an inter-governmental policy-making body established in 1989 by the G7 Paris Summit to combat money laundering. Its mandate was expanded in 2001 to include terrorist financing (post-9/11) and in 2012 to include weapons of mass destruction proliferation financing. With a permanent secretariat at the OECD headquarters in Paris and 39 members (37 member jurisdictions + European Commission + Gulf Co-operation Council), the FATF sets international standards — the FATF Recommendations (40 Recommendations, last revised in 2012/2019) — and assesses how effectively member and non-member jurisdictions implement them. The FATF's enforcement mechanism is its listing system. The FATF maintains two lists: (1) the 'Black List' (formally, Jurisdictions under Increased Monitoring with a call to action, or High-Risk Jurisdictions) — countries with strategic deficiencies in anti-money laundering/combating the financing of terrorism (AML/CFT) regimes posing a risk to the international financial system; and (2) the 'Grey List' (Jurisdictions under Increased Monitoring) — countries that have committed to address AML/CFT deficiencies under a time-bound Action Plan agreed with the FATF. Grey-listed countries face heightened scrutiny from international banks and correspondent banking networks, impacting access to global financial markets. India became an FATF member in 2010. India's last Mutual Evaluation was in November 2023, which placed India in the 'Regular Follow-Up' category — reflecting a high level of technical compliance with FATF standards. Pakistan has been on the FATF Grey List repeatedly (most recently 2018-2022); it was removed from the Grey List in October 2022 after addressing 34 action points. The FATF-Style Regional Bodies (FSRBs) — such as Asia/Pacific Group on Money Laundering (APG) and Eurasian Group — conduct FATF-style evaluations for non-FATF members.

• 1 FATF established: 1989, G7 Paris Summit; secretariat at OECD, Paris; 39 members (2024).
• 2 Mandate evolution: money laundering (1989) → terrorist financing (2001) → WMD proliferation financing (2012).
• 3 40 FATF Recommendations: international AML/CFT standard — last comprehensively revised 2012, with subsequent amendments.
• 4 Grey List: countries under increased monitoring with committed Action Plan — Pakistan was on it from 2018 to October 2022.
• 5 Black List (High-Risk Jurisdictions): North Korea and Iran are perennial members — face calls for counter-measures from the international community.
• 6 India: FATF member since 2010; Mutual Evaluation 2024 — placed in 'Regular Follow-Up' (high compliance, not on any list).
• 7 FATF grey-listing consequences: correspondent banks reduce/close relationships; IMF/World Bank increase scrutiny; trade finance costs rise significantly.

Pakistan's prolonged stay on the FATF Grey List (June 2018 to October 2022) had concrete economic consequences — international banks reduced correspondent banking exposure, external commercial borrowing costs rose, and access to SWIFT-connected financial services became more difficult. Pakistan had to implement 34 action points including passing the Anti-Terrorism Financing Act, prosecuting Lashkar-e-Taiba (LeT) and Jaish-e-Mohammed (JeM) financiers, and freezing assets of UN-designated terrorist entities — changes that India had been demanding bilaterally for years, demonstrating how FATF operates as a multilateral pressure tool.