The Financial Action Task Force (FATF) has found that many countries have not yet fully implemented its requirements aimed at preventing abuse of virtual assets and virtual asset service providers (VASPs).

WHAT IS THE FINANCIAL ACTION TASK FORCE (FATF)?

• The Financial Action Task Force (FATF) is an intergovernmental organization dedicated to combating money laundering and terrorist financing. FATF sets international standards and policies to prevent the abuse of virtual assets and virtual asset service providers (VASPs).

Origin:

1. The Financial Action Task Force (FATF) was established in 1989 during the G7 Summit in Paris with the objective of developing policies to combat money laundering
2. In 2001, its mandate was broadened to include terrorism financing as well.
3. Headquartered in Paris, France

Members: India became a member of the FATF in 2010.

1. Argentina
2. Australia
3. Austria
4. Belgium
5. Brazil
6. Canada
7. China
8. Denmark
9. European Commission
10. Finland
11. France
12. Germany
13. Greece
14. Gulf Cooperation Council
15. Hong Kong, China
16. Iceland
17. India
18. Indonesia
19. Ireland
20. Israel
21. Italy
22. Japan
23. Korea
24. Luxembourg
25. Malaysia
26. Mexico
27. Netherlands
28. New Zealand
29. Norway
30. Portugal
31. Russian Federation *
32. Saudi Arabia
33. Singapore
34. South Africa
35. Spain
36. Sweden
37. Switzerland
38. Türkiye
39. United Kingdom
40. United States

* FATF suspended membership of the Russian Federation on 24 February 2023

FATF's Lists: Grey List and Blacklist:

1. Blacklist: Countries known as Non-Cooperative Countries or Territories (NCCTs) are placed on the blacklist due to their support of terrorist financing and money laundering activities.
2. Grey List: Countries considered safe havens for supporting terrorist financing and money laundering are included on the FATF grey list. This serves as a warning that the country may enter the blacklist.

Blacklisted Countries:

• North Korea, Iran, and Myanmar are currently on the FATF blacklist.

Consequences of Being Blacklisted:

• Blacklisted countries face economic and financial restrictions and sanctions, including the withholding of financial aid from international organizations like the IMF, World Bank, ADB, and the EU.

Grey list countries :

1. Bulgaria
2. Burkina Faso
3. Cameroon
4. Croatia
5. Democratic Republic of Congo
6. Haiti
7. Jamaica
8. Kenya
9. Mali
10. Mozambique
11. Namibia
12. Nigeria
13. Philippines
14. Senegal
15. South Africa
16. South Sudan
17. Syria
18. Tanzania
19. Türkiye
20. Vietnam
21. Yemen

1. The most significant implication of the graylist for a country is damage to the country's reputation, as its effectiveness in combating financial crimes such as corruption and money-laundering as well as terror financing is considered low by international standards.
2. Economic sanctions imposed by the IMF, World Bank, and Asian Development Bank make it difficult to secure these institutions and other countries.
3. International trade, investment, aid, and foreign currency inflows are all declining.
4. Payment delays influence on supply chains and trade.
5. Costs of cross-border transactions are rising.

Q1) What are virtual assets?

Virtual assets are digital representations of value that can be traded, transferred, or used for payment or investment purposes. They have no physical form and do not include digital fiat currencies.

 

Examples of virtual assets include:

1. Cryptocurrencies
2. Non-fungible tokens (NFTs)
3. Gaming tokens
4. Governance tokens
5. Decentralized autonomous organization tokens
6. Tokens claiming to be backed by commodities or other underlying assets

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