FATF Current Affairs

RBI prohibits investments in non-cooperative countries and territories

The Reserve Bank of India (RBI) has prohibited Indian entities from making direct investments in any entity located in Non-Cooperative Countries and Territories (NCCT) as identified by Financial Action Task Force (FATF).

The prohibition is for aligning instructions under FEMA (Foreign Exchange Management Act) with the objectives of the FATF. At present, there is no restriction on an Indian entity with regard to the countries where it can undertake Overseas Direct Investment (ODI).

The NCCT initiatives principal objective is to reduce the vulnerability of the financial system to money laundering by ensuring that all financial centres adopt and implement measures for the detection, prevention and punishment of money laundering according to internationally recognised standards.

About Financial Action Task Force (FATF)

  • FATF is an inter‐governmental policy making body established in 1989 with ministerial mandate to establish international standards for combating money laundering and terrorist financing.
  • Its objectives are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to integrity of international financial system.
  • Initially it was only dealing with developing policies to combat money laundering. But in 2001 its purpose was expanded to act against terrorism financing.
  • Currently, it comprises two regional organisations and 35 member jurisdictions, including India, UK, US, China and the European Commission.

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India seeks help of US and European countries to crack terror fund trail from Pakistan

India has approached United States (US) and select European countries part of the Financial Action Task Force (FATF) to crack terror fund trail details of the Al Rehmat Trust from Pakistan.

Al Rehmat Trust is financer of terrorist outfit Jaish-e-Mohammad (JeM) which had carried out the attack at the Pathankot airbase (in Punjab) in January 2016.

India has alleged that Al Rehmat Trust, founded by JeM chief, Maulana Masood Azhar, uses its money for funding and training terrorist modules against India.

What is Financial Action Task Force (FATF)?

  • FATF is an inter‐governmental policy making body with ministerial mandate to establish international standards for combating money laundering and terrorist financing.
  • It was established in 1989 during the G7 Summit in Paris (France) to combat the growing problem of money laundering.
  • It comprises over 36 countries including India. FATF Secretariat is housed at the headquarters of the OECD in Paris.
  • Initially it was only dealing with developing policies to combat money laundering. But in 2001 its purpose was expanded to act against terrorism financing.
  • Objectives: Set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
  • Functions: (i) ­Set international standards to combat money laundering and terrorist financing. (ii) ­Assess and monitor compliance with the FATF standards. (iii) ­Conduct studies of money laundering and terrorist financing methods, trends and techniques. (iv) Respond to new and emerging threats, such as proliferation financing (used for promoting proliferation of chemical, biological and nuclear weapons).

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