The Financial Action Task Force (FATF) is an intergovernmental organisation that functions as a global policy-making body, not an act or a scheme. It was established in 1989 by the G7 Summit in Paris to address the growing problem of money laundering. Following the events of 2001, its mandate was expanded in 2001 to include combating terrorist financing. The FATF's core mechanism is the development of the 40 Recommendations, which are international standards for anti-money laundering (AML), counter-terrorist financing (CFT), and countering proliferation financing (CPF). These recommendations are not legally binding but are implemented by over 200 countries and jurisdictions through domestic legislation.
The FATF monitors compliance through a process of Mutual Evaluations (peer reviews) of member countries. Jurisdictions that fail to meet the standards may be placed on the "greylist" (formally, "Other monitored jurisdictions") or the "blacklist" (formally, "High-Risk Jurisdictions Subject to a Call for Action"), which carries significant economic and reputational consequences. India, which became a full FATF member in 2010, connects this international standard to its domestic legal framework primarily through the Prevention of Money Laundering Act (PMLA), 2002, and the Unlawful Activities (Prevention) Act (UAPA), 1967. The Directorate of Enforcement (ED) is assigned with the implementation of the PMLA.
Recently, the FATF has continuously updated its standards to address emerging risks, such as expanding its focus to Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs). In February 2025, the FATF Plenary approved amendments to Recommendation 1 and its Interpretive Note, along with corresponding changes to Recommendations 10 and 15, to better promote financial inclusion through a risk-based approach. This update allows for simplified customer due diligence measures in lower-risk scenarios.