Explained: What Is FATF And Why Is India Considering Dragging Canada There Over 'Terror Financing'

New Delhi: The Financial Action Task Force (FATF) is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering and terrorist financing. The FATF currently has 39 member jurisdictions and two regional organizations that associate themselves with the FATF's work. The FATF's 40 Recommendations set out the international standards that aim to prevent these crimes and promote the development of effective systems to combat them. FATF Recommendations are recognized as the global standard for preventing and combating money laundering, terrorist financing, and proliferation financing.

How FATF Works?

The FATF works closely with its members and other international organizations to promote cooperation and coordination in the fight against money laundering and terrorist financing. The FATF also reviews the effectiveness of national anti-money laundering and counter-terrorist financing regimes and provides technical assistance to countries to help them implement the FATF's standards.

India isn’t messing around. New Delhi is reportedly planning to move FATF (Financial Action Task Force) against Canada's soft stand towards terror elements.https://t.co/amz04Z3X0a — Derek J. Grossman (@DerekJGrossman) October 24, 2023

India Plans To Move FATF Against Canada

India has also accused Canada of having a soft stand towards terror elements, especially those related to the Khalistan movement, which seeks to create a separate Sikh state in India. India has claimed that it has shared evidence with Canada multiple times in the past about the funding and activities of Khalistani groups operating from Canadian soil, but Canada has not taken any action against them, citing freedom of speech and expression.

India has reportedly decided to lodge a formal complaint against Canada in the FATF and submit a dossier containing all the evidence so far. India's move is aimed at putting pressure on Canada to act against the Khalistani elements and to expose Canada's role in supporting terrorism. India may also file a complaint against some Canadian diplomats for interfering in India's internal affairs.

India's complaint could lead to Canada being placed on the FATF's "grey list", which would have adverse consequences for its economy and reputation. However, sending Canada to the "grey list" may not be easy, as it would require the consensus of all FATF members, some of whom may have close ties with Canada. Moreover, Canada may also challenge India's evidence and accuse it of using the FATF as a tool for settling political disputes.

FATF's Action Against Pakistan

Pakistan has been on the FATF's "grey list" since June 2018, which means that it has strategic deficiencies in its anti-money laundering and counter-terrorist financing regime and is subject to increased monitoring and reporting by the FATF. The FATF has given Pakistan a list of 27 action items to address these deficiencies.

According to the latest FATF plenary meeting held in October 2021, Pakistan has successfully completed 26 out of the 27 action items and has made significant progress in improving its AML/CFT regime. The FATF has decided to remove Pakistan from the "grey list" and no longer subject it to increased monitoring.

However, the FATF has also urged Pakistan to continue to work on the remaining action item, which is to demonstrate that terror financing investigations and prosecutions target senior leaders and commanders of UN-designated terrorist groups.