CSB IAS ACADEMY

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TOPIC OF THE DAY (DATE: 04.11.2023)
FATF REPORT ON TERROR FINANCING
WHY IN NEWS?
Recently, FATF Terror Financing Report Published by the Financial Action Task force during its plenary
meeting,
ABOUT FINANCIAL ACTION TASK FORCE
● FATF is an inter-governmental policy-making and standard-setting body dedicated to combating
money laundering and terrorist financing.
● It was established in 1989 during the G7 Summit in Paris to develop policies against money
laundering.
● it is a 39-member body representing most major financial centres in all parts of the world.
● The FATF Plenary is the Decision making body of the FATF. It meets tri-annually - in February,
June and October, to take stock of “Mutual Evaluation Reports” (MERs) of the countries.
● After the 9/11 attacks on the US, the FATF in 2001 expanded its mandate to incorporate efforts
to combat terrorist financing.
● In April 2012, it added efforts to counter the financing of proliferation of Weapons of Mass
Destruction (WMD)
● Headquarters: Paris, France.
What are FATF 'grey list' and 'blacklist'? FATF has 2 types of lists:
● Black List: Countries known as Non-Cooperative Countries or Territories (NCCTs) are put on the
blacklist. These countries support terror funding and money laundering activities. The FATF
revises the blacklist regularly, adding or deleting entries.
● Grey List: Countries that are considered a safe haven for supporting terror funding and money
laundering are put on the FATF grey list. This inclusion serves as a warning to the country that
it may enter the blacklist.
Consequences of Being Enlisted in FATF Lists: The enlisted countries are subjected to:
o Economic sanctions from financial institutions affiliated with FATF (IMF, World Bank, ADB etc.)
o Problem in getting loans from such financial institutions and countries
o Reductions in international trade and International boycott.
FATF’s mandate –
● Establishing standards and encouraging the proper application of legal, regulatory, and operational
measures and developing policies for combating money laundering
● Recognises the need to continue to lead decisive, coordinated and effective global action to counter
the threats of the abuse of the financial system by criminals and terrorists, and
● The FATF conducts peer reviews of each member on an ongoing basis to assess levels of
implementation of the FATF Recommendations.
● It provides an in-depth description and analysis of each country's system for preventing criminal abuse
of the financial system.
● India is currently under the FATF review. It last underwent a similar review in 2013 where it was
found that India had reached a satisfactory level of compliance.

Phone No: 9966436874, 8374232308 1

 CSB IAS ACADEMY
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Highlights of the FATF Report - ‘Crowdfunding for Terrorism Financing
● Terrorist organisations are resorting to Crowdfunding to support their operations.
● In crowdfunding, the "crowd" funds the idea or project through an online platform, i.e., the
internet, social media, etc
● The FATF report notes different ways in which crowdfunding platforms can be abused for
terrorist financing purposes -
○ Abuse of humanitarian, charitable or non-profit causes;
○ Use of dedicated crowdfunding platforms or websites;
○ Use of social media platforms and messaging apps; and
○ Interaction of crowdfunding with virtual assets.
Recommendations:
● Including crowdfunding in national risk assessments.
● Making Crowdfunding platforms accountable.
● Fully implement the FATF Standards relevant to VA, Non-Profit Organisations, etc.
● strong domestic and international information sharing mechanisms.
What Makes Crowdfunding an Attractive Method of Fundraising for Terrorist Financing?
● The possibility of quickly and easily reaching a global audience makes crowdfunding an
attractive method of fundraising for terrorist financing.
● Some estimates have valued the global crowdfunding market at $17.2 billion in 2020 and note
that it is expected to reach $34.6 billion by 2026.
● There were over 6 million crowdfunding campaigns around the world.
● Although the majority of crowdfunding activity is legitimate, terrorist groups (like ISIL) and
ethnically or racially motivated terrorist (EoRMT) have exploited it to raise money for terrorist
financing purposes.
● While certain jurisdictions and industries proactively implement measures to mitigate these
risks, anti-money laundering and counter-terrorist financing (AML/CFT) regulation is not
consistent across the globe.
Major FATF Recommendations Since its formation to curb Terror Finacing:
• In April 1990, less than one year after its creation, the FATF issued a report containing a set
of Forty Recommendations intended to provide a comprehensive plan of action needed to fight
against money laundering.
• In 2012, the FATF revised its recommendations and expanded them to deal with new threats such
as the financing of proliferation of WMD.
• Over 200 jurisdictions around the world have committed to the FATF Recommendations through
the global network of nine FATF-Style Regional Bodies (FSRBs) and FATF memberships.
Way Forward
● In their own jurisdiction, countries should evaluate the nature, scope, and hazards involved
with crowdfunding for individuals, businesses, and other sorts of organizations.
● Countries should be aware that their jurisdictions can still be utilized as a pass-through for
money flows even in the absence of considerable domestic terrorism activities.
● International nature of crowdfunding campaigns and related financial transfers, nations
should also pay attention to the risk assessments of the sector as a

Phone No: 9966436874, 8374232308 2