FATF’s Latest Report on Terrorist Financing Risks

Why in the news?

The Financial Action Task Force (FATF) has undertaken a project to compile the “Comprehensive Update on Terrorist Financing Risks” report, which was recently released.

• Global Collaboration - The report was co-led by the UN Security Council Counter-Terrorism Committee and France, with India making a significant contribution.
• Spotlight - For the first time, state sponsorship of terrorism was officially acknowledged in an FATF report.
• Highlights - India’s 2022 National Risk Assessment (NRA) flagged Pakistan as a primary source of state-sponsored terrorism.
• Based on NRA findings, Indian financial institutions are required to conduct enhanced due diligence on transactions involving Pakistan.
• It is also expected that the report may also reflect the findings of the NRA’s of all other countries.
• It is indicated that certain terror outfits had been and continued to receive financial and other forms of support from several national governments.
• Wider Evidence - The FATF report used data from delegations and open sources, showing ongoing support for terror outfits by some governments.
• Legal Framework - FATF explicitly stated that state funding of terrorism contradicts its standards, international conventions, UNSC Resolution 1373 (2001).
• Security Threat - State-sponsored terrorism is described as a long-standing threat to international peace and regional financial stability.
• Some Illicit Channels - One tactic includes oil smuggling from Iran to Pakistan, suspected of funding terrorism.
• NGO Misuse - Terror outfits like Jaish-e-Mohammed and Lashkar-e-Taiba use fake charities to raise and move funds.
  • These organizations are disrupting aid operations and causing Humanitarian Abuse.
• Global Impact - The FATF report, having higher precedence than national assessments, will pressure countries to recognize and respond to state-linked threats.
• Financial Isolation - Due to international scrutiny, Pakistan’s transactions face increased costs, making it less attractive for global banking.

Reference

The Hindu| FATF’s Latest Report on Terrorist Financing Risks