India plays key role in bringing out FATF's latest report on terrorist financing risks
It is learnt that the United Nations Security Council Counter-Terrorism Committee Executive Directorate and France were the co-leads for the project. India also played a significant role in bringing out the report, which has, for the first time,e recognised state sponsorship as a means to fund and support terrorism.
'We have long identified Pakistan as a state that sponsors terrorism. India's 2022 National Risk Assessment (NRA) on Money Laundering and Terror Financing flagged state-sponsored terrorism — particularly from Pakistan — as a major concern. Accordingly, all financial institutions, including banks, are required to do enhanced due diligence with respect to any transaction related to Pakistan,' said a government official.
The findings highlighted in the FATF report are expected to reflect in the framing of subsequent NRAs of all the other countries. The United States, in its 2024 National Terrorist Financing Risk Assessment, has already noted that it faced terrorism threats from terror groups in Pakistan, apart from Afghanistan, Southeast Asia, and East Africa.
'Being an NRA, it is followed by all U.S. banks while adhering to their KYC guidelines. They are cautious about transactions with Pakistan, and this increases the cost of doing business for the Pakistani establishment and businesses. After this FATF Risk report — which carries higher precedence over NRAs — the U.S. and other countries will have to acknowledge the sources of state-sponsored terrorism in their risk assessments,' the official said.
In the FATF report, the global money laundering and terror financing watchdog has considered the inputs received from delegations and publicly available sources of information. They indicated that certain terror outfits had been and continued to receive financial and other forms of support from several national governments.
'While the FATF has not developed a typology specific to state-sponsored terrorism, it has explicitly noted that the funding of terrorism, or the resourcing of a terrorist entity, by any state, is incompatible with adherence to the FATF Standards and mandate, as well as the International Convention for the Suppression of the Financing of Terrorism, and paragraphs 1(a) and 2(a) of UNSC Resolution 1373 (2001),' it said.
The report recognised that the possibility of state-sponsored terrorism was a 'long-standing terror financing threat to international peace and security, as well as to the stability of regional financial and political systems.'
'Moreover, it undermines the effectiveness of FATF activities that are intended to support governments in adopting best practices to detect, deter, and otherwise disrupt terror financing,' it added.
'Among the various suspect modus operandi adopted for state sponsoring of terror outfits is the ongoing smuggling of oil from Iran to Pakistan. There is a high risk of funds so generated being used to finance terrorist activities,' said another official.
According to the report, sham non-profit organisations are also being used by Pakistan-based terror outfits such as Jaish-e-Mohammed and Lashkar-e-Taiba, both associated with the Al Qaeda, to raise, store, and move funds on the false pretext of charitable work. The outfits were reported to have abused humanitarian assistance programmes using such entities to finance their operational activities.
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