FATF

The Financial Action Task Force is the body that decides what counts as an adequate anti-money-laundering regime, for the whole world.

It was founded in 1989 on the initiative of the G7 Summit in Paris, and is also known by its French name, Groupe d'Action Financière (GAFI). It makes no law. It writes standards, assesses whether countries meet them, and publishes the answer — and because banks everywhere read that answer before deciding who to do business with, the standards behave like law.

India became a member in 2010. IFSCA states expressly that it is committed to a regulatory environment that is fully FATF compliant, which is why the IFSCA Guidelines read more like the FATF Recommendations than like a domestic circular.

FATF began with 16 members; by 2023 it had 40. More than 200 countries and jurisdictions have committed to implement its Standards, assessed with the help of nine FATF Associate Member organisations together with the IMF and the World Bank.

In its first year FATF issued a report containing forty Recommendations; after the 9/11 attacks in 2001 it expanded its mandate to cover terrorist financing and added the IX Special Recommendations. The 40+9, with their interpretive notes and the Glossary definitions, are collectively the FATF Standards. The 40 are grouped into seven areas, from AML/CFT policies and coordination through to international cooperation, and their cornerstone is the risk-based approach — Recommendation 1.

In 2019 FATF Ministers gave the body an open-ended mandate after three decades of time-bound ones, and extended the Presidency to a two-year term running 1 July to 30 June. Elisa de Anda Madrazo of Mexico is President from 1 July 2024 to 30 June 2026, succeeding T. Raja Kumar of Singapore; Giles Thomson of the United Kingdom became Vice-President on 1 July 2025.

The decision-making body, the FATF Plenary, meets three times a year and can name a country a Jurisdiction under Increased Monitoring — the "grey list" — or a High Risk Jurisdiction — the "black list", where FATF urges all jurisdictions to apply enhanced due diligence and, in the most serious cases, counter-measures. Nine FATF-Style Regional Bodies extend the network; India belongs to two of them, the Asia/Pacific Group (APG) and the Eurasian Group (EAG).

A GIFT IFSC banking unit runs a correspondent relationship with Larimar Bank, incorporated in a jurisdiction that the FATF Plenary moves to the grey list at its February meeting.

Nothing in Indian law changes that morning. What changes is the bank's own rulebook. The IFSCA Guidelines require it to be cautious with respondent banks located in jurisdictions which have strategic deficiencies or have not made sufficient progress in implementing FATF Recommendations, to monitor payment messages to and from high-risk jurisdictions, and to apply enhanced due diligence proportionate to the risks to persons from countries for which FATF calls for it.

So the unit re-papers the relationship: fresh enquiries into Larimar's management, major business lines and the quality of supervision over it; an assessment of its AML/CFT controls; and Senior Management approval to continue. A USD 4.2 million trade payment routed through the relationship is held while name screening runs.

Had the jurisdiction gone to the black list instead, the workbook's language escalates: FATF then calls on all members to apply enhanced due diligence and, in the most serious cases, counter-measures to protect the international financial system.

One vote at a Plenary in Paris; one Gujarat banking unit rewriting a client file.

Chapter 8 is entirely FATF — origin, mandate, Recommendations, the grey and black lists, the FSRBs and the trade-based money laundering guidance. Chapter 1 (section 1.3.2) introduces it and gives India's 2010 membership and its two FSRBs. Expect pure recall — 1989, G7 Paris, 16 to 40 members, Plenary three times a year, nine FSRBs — and one conceptual question on what grey-listing actually obliges a regulated entity to do.

• Grey list = Jurisdiction under Increased Monitoring; black list = High Risk Jurisdiction. The country has committed to resolve its deficiencies on the grey list; the black list is where counter-measures are urged.
• 40 + 9, not 49 in one list. The IX Special Recommendations are a separate terrorist-financing set added after 2001.
• The Plenary meets three times a year; the Presidency runs two years from 1 July. Do not merge the two numbers.
• India is a member of FATF (2010) and of two FSRBs, APG and EAG — not of all nine.
• FATF issues no penalties and binds no one directly. It sets standards and publishes assessments; the obligation on a Regulated Entity comes through the IFSCA Guidelines and the PMLA.
• The workbook says the forty Recommendations were revised in 2023, while the Recommendations table it reproduces is captioned "Version as adopted on 15 February 2012". Both statements appear in Chapter 8; if a question turns on the date, read what it is actually asking — the framework's adoption, or its latest revision.