FATF is part of the Organisation for Economic Cooperation and Development (OECD) (Representative image)
The Financial Action Task Force (FATF) says that it has made major changes to the criteria for putting countries on its lists to focus more on nations posing greater risks to the international financing system and easing the pressure on lesser developed nations.
The FATF is part of the Organisation for Economic Cooperation and Development (OECD), a grouping of rich economies around the world, and which monitors tax havens to curb money laundering and other cross-border financial crimes and it lists countries on the basis of their regulation of the financial systems.
The FATF also identifies jurisdictions with strategic deficiencies for fighting money laundering, and terrorist financing and then works with the respective nations to close the loopholes which allow illegal financial flows.
Illicit financial flows, including tax evasion, corruption and organised crime, divert vast sums of money each year from essential public services like education and healthcare. This undermines sustainable development in the least developed countries, hindering their progress and ability to provide for their citizens.
Thus, to help these nations propel their economic and social development, it is important to deprive these criminals of their ill-gotten gains.
The statement says that the recent changes made to the listing process will ensure that the FATF focuses more on the countries that pose the greatest risk to the international financial system and contribute to adequate support to low-capacity nations.
Under the revised criteria, jurisdictions will be prioritised for active review if they meet the referral criteria which are that the jurisdiction must be a member of FATF, a country on the World Bank High-Income Countries list, excluding those with a financial sector of two or fewer banks and a country with financial sector assets above USD 10 billion.
The statement also states that if a nation falls under the category of least developed country as defined by the United Nations, it would not be prioritised for active review unless the FATF agrees that it poses a significant risk. In such a case, the nation will be granted a longer, two-year observation period during which it can work on the progress against its Key Recommended Action roadmap.
The changes will come into effect during the next round of assessments and the FATF predicts that the reforms could reduce the number of low-capacity nations being listed in the upcoming assessment cycle by half.