Suchak Patel asked: In its 30 years of existence, how effective has FATF been in terms of checking terror finance in South Asia?

Ashok Kumar Behuria replies: The Financial Action Task Force (FATF) is an inter-governmental body established in 1989. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures by different states for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. 

The FATF is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. The Asia Pacific Group (APG), which is a part of FATF with 41 member states, undertakes reviews of measures taken by states to comply with their commitments to stop money laundering and terrorist financing. The FATF, through APG, monitors the progress of its members in implementing necessary measures; reviews money laundering and terrorist financing techniques and counter-measures; and promotes the adoption, implementation, and enforcement of appropriate measures to meet the standards set out in the FATF Forty Recommendations and Eight Special Recommendations.

Its record in making states in South Asia to meet the standards has been quite significant in the face of laxity shown by Pakistan to keep its commitments in this regard.  As an Intergovernmental organisation, one would expect FATF to be as effective as the countries/governments are willing to make it. In recent years, there has been a no-nonsense approach adopted by the member states on money laundering and terrorist financing issues resulting in grey-listing of Pakistan and bringing in enough pressure on Pakistan to comply with the FATF recommendations. For example, this year’s latest APG Mutual Evaluation Report (MER) shows that Pakistan, during the last one year, has managed to undertake 2420 money laundering investigations leading to 354 prosecutions, and registered 228 terrorist financing cases leading to 58 convictions.

The report also suggests that there are about 66 organisations and approximately 7,600 individuals proscribed under the United Nations Security Council Resolution 1373. The overall assessment points to insufficient understanding of the risks of money laundering and terrorist financing by both government and private players in the financial domain. Such reviews do make an impact on the policies and approaches of the countries under review, as can be seen in the manner in which Pakistan is desperately trying to avoid getting into the FATF black list.

There is no empirical means of ascertaining its impact on the ground in terms of checking terror finance. However, if one were to look at the incidents of terror in the region, the numbers have gone down in absolute terms indicating lowering of potential of terror outfits at the moment – signalling lack of resources to some extent. Similarly, there has been a proliferation of number of legal measures to fight the menace of money laundering and terrorist financing across states. However, it has to be remembered that this is a continuing process as means of money laundering and terrorist financing keep changing and measures will have to continually evolve to keep pace with them. It is kind of a cat-and-mouse game which is likely to continue. Nevertheless, FATF has established itself as a body that does carry an impact on the policies that the states are required to take to deal with issues pertaining to money laundering and terrorist financing, which act as oxygen for terror-- the most ominous threat to world peace today.

Posted on October 18, 2019   

Views expressed are of the expert and do not necessarily reflect the views of the IDSA or of the Government of India.