Comprehensive Update on Terrorist Financing Risks

Source: PIB
GS II: Important International institutions, agencies and fora- their structure, mandate

Overview

1. News in Brief
2. Detailed Report on Comprehensive Update on Terrorist Financing Risks

Why in the News?

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

News in Brief

• The global money laundering and terrorist financing watchdog, the Financial Action Task Force (FATF), has for the first time introduced the concept of state-sponsored terrorism in its latest report titled Comprehensive Update on Terrorist Financing Risks.
• The report highlights that such funding constitutes a longstanding threat to international peace and security, as well as to the stability of regional financial and political systems.
• This continued abuse of the financial system poses a serious threat to global security and undermines international peace.
• The Fourth Round of Mutual Evaluations, covering over 194 jurisdictions, revealed that 69% of assessed jurisdictions exhibited major or structural deficiencies in effectively investigating, prosecuting, and convicting terrorism financing cases.

Detailed Report on Comprehensive Update on Terrorist Financing Risks

• The report was co-led by the UN Security Council Counter-Terrorism Committee and France, with India making a significant contribution.
• For the first time, state sponsorship of terrorism was officially acknowledged in an FATF report.
• 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.
• The FATF report used data from delegations and open sources, showing ongoing support for terror outfits by some governments.
• FATF explicitly stated that state funding of terrorism contradicts its standards, international conventions, UNSC Resolution 1373 (2001).
• State-sponsored terrorism is described as a long-standing threat to international peace and regional financial stability.
• One tactic includes oil smuggling from Iran to Pakistan, suspected of funding terrorism.
• 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.
• The FATF report, having higher precedence than national assessments, will pressure countries to recognize and respond to state-linked threats.
• Due to international scrutiny, Pakistan’s transactions face increased costs, making it less attractive for global banking.

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