CURRENT AFFAIRS 7 OCTOBER 2019

CURRENT AFFAIRS

7 OCTOBER 2019

BY SUMIT

1.BREXIT(GS-2,3)

CONTEXT:EU to reach Brexit position by end of next week: Macron

French President Emmanuel Macron on Sunday told British Prime Minister Boris Johnson that the possibility of a Brexit accord would be evaluated by the end of next week.

Mr. Johnson, in a telephone conversation with Mr. Macron, “presented his latest proposals,” the French presidency said in a statement.

Background

Post the Second World War, two countries Germany and France came together and decided that they wanted to establish trade relations as it would prevent their countries waging war against each other in the future.
The result was the 6 members (France, Germany, Italy, Belgium, Luxemburg and Netherlands) signed a deal covering resources like coal and steel.
In 1957 a treaty was signed in Rome (Europe)-European Economic Community (EEC) or Common Market
This has expanded and now has 28 member states.
There are four key institutions in the EU
European Commission- based at Brussels (Belgium), it consists of 28 commissioners (1 each from the member states, it administers the money spent and also formulates new laws
European Parliament- based at Brussels (Belgium), there are 751 members in the parliament, their function is to discuss and vote all the laws that have been proposed by EC
Council of European Union- based at Brussels (Belgium), It is where the government of each member country will have their say and hold discussions as to in what political direction should the EU be moving. Usually the deals are signed at the end of the discussions
European Court of Justice- based at Luxembourg. The function is to make sure that all the member states abide by the rules and regulations; will also come into picture if there are any frictions between the above three institutions.

The Great Britain

It became a member country in 1973 and held the first referendum in regards to EU in 1975 (when they voted to stay in EU)
A referendum is basically a vote in which everyone of voting age takes part specifying –yes or no- answer to a question. Whichever side gets the majority of votes (of the total votes cast) is considered to be a winner.

Today the arguments in favor of BREXIT have increased because the representatives of BRITAIN are of the opinion that the EU over the decades has undergone a lot of transformation and has taken away the powers of Britain to decide on various matters

Some of the reasons for Britain to seek BREXIT are...

Sovereignty- Although the British Government has an influence in some form in selecting the members to the European Commission, the members are neither under the influence nor accountable to the British Parliament and some of the policy decisions such as competition policy, agriculture, copyright and patent law go against the interests of Britain (these laws override the domestic laws)
Regulations are becoming burden- some of the regulations such as –limits on the power of vacuum cleaners, non-recycling of tea bags etc have often been seen as a burden on some of the conservatives in Britain. As per Michel Gove these regulations have cost Britain to the tune of £3 billion per year.
Euro the disaster- although Euro is the common currency for EU, Britain still uses pound as its currency. Now if the euro had to be successful then it would have required greater fiscal and monetary integration and this cannot be achieved unless all the member states have the same currency. The problem with euro as a common currency has also been exposed wherein on one side countries such as Greece and Spain are suffering from high debt, high unemployment, whereas other countries such as Germany are enjoying higher growth. Now in this situation the ECB (European Central Bank) is in dilemma whether to go for fiscal stimulus or prudence.
Immigration- Britain is not a signatory of Schengen Border free zone (allows easy travel across Europe), over the last ten years there has been a quite an opposition towards migration into the country from within the EU and its effects on wages and public services especially post 2008 recession wherein the workers from Lithuania, Poland, Italy, Romania etc have moved to Britain
The “leave” proponents show the example of Canada and Australia which follow a point based immigration system and say Britain could adopt such measure rather than being forced to follow the laws laid down by EU

Point based immigration system-under this the potential migrants are awarded points based on factors such as language, job skills, education and age. In simple words those who can contribute to the economy once they allowed to immigrate will be rated higher
Finance- although EU doesn’t have the powers to collect the taxes from the people directly, it mandates member countries to make payments. In case of Britain it comes around $19 bn per year or $300/person. Although the funds are again used on Britain, the BREXIT supporters say, the money could be used more efficiently, if Britain is out of EU
EU pro or anti corporate?- there has been a mixed response to this question. The far left in Britain argues that EU is too pro-corporate and the far right argues the vice versa

Any measures taken to prevent call for BREXIT- In the beginning of 2016, David Cameroon (Britain’s PM) sought an agreement to change the terms of Britain’s membership, the deal was conditioned on BREXIT outcome to remain within EU. Some of the points under the agreement are

a) Migrant workers will still be able to send child benefit payments back to their home country ( Mr. Cameron had wanted this abolished), but the payments will be set at a level reflecting the cost of living in their home country rather than the full UK rate

b) New migrant arrivals will not be able to claim tax credits and other welfare payments straight away – but will gradually will gain the right to more benefits. (he had promised a blanket ban)

c) Britain will retain pound also an assurance from EU that it will not be discriminated as it has a different currency and any money of Britain used to bail out the nations in crisis (in Euro Zone) will be reimbursed.

d) Britain’s large financial service industry will be protected from imposition of euro zone regulations

e) It will be incorporated in an EU treaty change that Britain will not be a part of “ever closer union” (one of the core principles of EU).

f) Red card system- If 55% of national EU parliaments object to a piece of legislation then the legislation has to be rethought (the critics say it is not clear if this would ever be used in practice).

The critics pointed out that what was proposed under the agreements made no change and fell short of what he had promised when he had announced his plan for referendum Why Scotland voted in favor of staying- as per the numbers it was found that 62% of the voters in Scotland chose to remain within EU. The reasons for their decision are

a) EU is a common market which not only allows the movement of four freedoms (finance, goods, services and labour) but also provides a huge market for Scotland to export

b) With Scotland being a part of EU, the trade barriers will be eliminated to a great extent (both for exports from and imports into Scotland)

c) Scotland has been able in attracting foreign investments as a result of which there has been employment creation, contribution to growth etc (in 2013, 40% of the companies in Scotland were foreign owned which employed more than 3 lakh workers)

d) When the EU negotiates a deal with other countries (has trade deals with more than 50 countries), it is automatically applicable to Scotland but with BREXIT, Scotland may be forced to sign all the deals again with the trade partners (the advantages may be lost)

e) As a member of EU, it will get access to various development funds (Regional Social Funding, Rural Development Programme etc)

f) With BREXIT, the citizens of Scotland may lose the freedom of movement i.e. to move freely in Europe

g) In a nutshell Scotland is much safer than remaining within rather than moving out of EU. (on moving out it will face security/terrorist threats, climate change, trade barriers etc all alone)

Global impact of BREXIT

a) The globalization has increased correlation between the countries. If there is a disturbance in one country then there will be impact on other countries

b) The BREXIT would affect the global growth

c) It is a big blow when more countries are moving towards multilateral trade arrangements

d) It will further alienate the investors and the capital will move from risky markets to more safer havens

e) The major exporting countries such as China and India would get affected as EU is one of the major export market

f) As per one of the estimates BREXIT would lead to 25% reduction in imports by Britain

g) BREXIT was a referendum which rode on many components-anti immigration, increasing protectionism etc. with this these sentiments are going to increase in other parts as well

h) Britain was one of the major financial and military contributors to the EU but with BREXIT, the financial of EU will suffer.

i) With BREXIT there are calls for NEXIT(Netherlands exit), Italeave (Italy leaving) and FREXIT (France Exit) etc

j) With BREXIT there have been demands for Scotland exiting from UK

Impact of BREXIT on India

a) India is the third largest source of FDI for UK. There are more than 800 Indian companies in Britain. With BREXIT, the business of these companies will be affected. With the fluctuation in exchange rates, the bottom line of these companies will suffer.

b) Although the pro exit supporters have claimed that the Britain can sign bilateral agreements free of restrictions any restrictions imposed by EU now, but the experience has shown that it takes a long period to negotiate and sign a new atrade agreement (eg- India and Japan took around 5 years to discuss and conclude CEPA)

c) India considers Britain as a gateway to EU, now with Britain opting out, India loses the advantage. Hence there is a need to get border free access

d) The FTA that India was negotiating with EU will not have the same impact (negotiations are going on since 2007). Now since Britain is out, India needs to work on an agreement separately with Britain

e) UK accounts for 17% of India’s IT exports. With BREXIT the overhead costs are going to increase. Nasscom in a report has said that the Indian IT industry is going to experience a negative influence in the short term. The depreciation of pound also will have an effect on the returns of these companies.

f) One argument is that BREXIT could lead to movement of skilled labour from India to Britain but this might be a misplaced argument as immigration into Britain from other EU countries was one of the reasons for BREXIT.

g) UK and EU both account for 23.7% of rupee’s effective exchange rate. BREXIT would lead to outflow of foreign portfolio investments and this may further weaken rupee. (on the positive side the central bank will try to maintain the liquidity in the market so the fear of fed hike of interest rate could be brought down)

h) Brexit is a blow to the commodity prices. As such because of lower global demand, slowdown in china and many European countries had led to drop in the prices of commodities and this will be further accentuated because of BREXIT.

i) The sectors that would get affected are-auto and auto components; IT sector, metals, oil, aviation, pharmaceuticals etc

j) The central bank has to recaliberate the monetary policy so as to reduce the market volatility

List of some of the companies that export to Europe and the drop in the share prices

Company	Share of revenues from EU	Note
Tata motors	31%	Almost half of these revenue come from UK
TCS	11%	Almost 15% revenue from UK
Tata steel	52%	Share prices dropped by 6.37% (on 24thJune 2016)
Infosys	23%	Share prices dropped by 1.41% (on 24thJune 2016)
TechM	28.5%	Share prices dropped by 4.7% (on 24thJune 2016)

What could be done in India

a) The central bank has to recalibarate its monetary policy so as to account for the volatility that will be craeted in the market

b) SEBI and the stock markets will have to be very watchful in not allowing any manipulators from taking undue advantage. Brokers, portfolio managers and other market intermediaries have to be prevented from any attempts to lure small retail investors into promises of hefty gains from the futures and options trading, especially in banking stocks and indices, the official added.

c) Since Brexit makes the revival of global growth more difficult, there is a need for Indian to focus more on the domestic demand so that the impact is minimized

d) The strong forex reserves position has to be maintained so that any fluctuations in the exchange rate of rupee can be limited

e) The companies that have business in Europe (especially in UK and it pertains more to the IT industry) have to rework their strategy.

What most of the experts agree upon is the effect of BREXIT on the global economy coupled with weakening/depreciating currencies of various countries will make it more harder for recovery and in case of India, thanks to the stability in the fundamentals of domestic economy and huge forex reserves position, the effect of BREXIT can be minimized, but nevertheless the effect is going to be felt in short term. Approach to UPSC GS 3- International economics, trade relations Questions

The BREXIT makes the global economic recovery more difficult-discuss
In the light of recent BREXIT what will be the impact on the Indian economy
When elephants fight, grass suffers-discuss the statement in the light of BREXIT

2.Information Fusion Centre — Indian Ocean Region (IFC-IOR)(GS-3)

CONTEXT:India starts sharing maritime data

The Information Fusion Centre – Indian Ocean Region (IFC-IOR) set up last year has started functioning as an information sharing hub of maritime data and “cuing incident responses” to maritime security situations through a collaborative approach, Navy sources said.

At the just concluded Goa Maritime Conclave (GMC), National Security Adviser Ajit Doval had offered countries in the IOR use of the facility to track movement of vessels on the high seas.

The major centres with which regular exchange of maritime security information is being undertaken include Virtual Regional Maritime Traffic Centre (VRMTC), Maritime Security Centre - Horn of Africa(MSCHOA), Regional Cooperation Agreement on Combating Piracy and Armed Robbery (ReCAAP), Information Fusion Centre-Singapore (IFC-SG), and International Maritime Bureau - Piracy Reporting Centre (IMB PRC).

The IFC-IOR was inaugurated in December 2018 within the premises of the Navy’s Information Management and Analysis Centre (IMAC) in Gurugram.The IMAC is the single point centre linking all the coastal radar chains to generate a seamless real-time picture of the nearly 7,500-km coastline.

Information Fusion Centre — Indian Ocean Region (IFC-IOR)…..

3.BUDGET(GS-2)

CONTEXT: Budget work to start on October 14

The Finance Ministry will start its pre-Budget work from October 14 onwards, according to a circular it sent to all Ministries and Departments.
The other Ministries will have to prepare and send their budgets, expenditure trends, and non-tax revenue estimates for 2020-21 by October 9 to the Finance Ministry. Following this, the Finance Ministry will hold separate meetings with all the other Ministries, from October 14 to the first week of November.

Government Budgeting:

What exactly is a budget?

As you know, the budget is a report presented by the government. It is a report of the government finances which includes revenues and outlays.
Thus, the budget can be defined as the most comprehensive report of the government’s finances in which revenues from all the sources and outlays for all activities are consolidated.
In simple terms, the budget is an annual financial statement of the revenue and expenditure of a government.

Budget in the Indian Constitution

The term ‘Budget’ is not mentioned in the Indian Constitution; the corresponding term used is ‘Annual Financial Statement’ (article 112).

What are the constitutional requirements which make Budget necessary?

Article 265: provides that ‘no tax shall be levied or collected except by authority of law’. [ie. Taxation needs the approval of Parliament.]
Article 266: provides that ‘no expenditure can be incurred except with the authorisation of the Legislature’ [ie. Expenditure needs the approval of Parliament.]
Article 112: President shall, in respect of every financial year, cause to be laid before Parliament, Annual Financial Statement.

Budget Documents

Do you know that Annual Financial Statement is only one of the several budget documents presented by Finance Minister?

The Budget documents presented to Parliament comprise, besides the Finance Minister’s Budget Speech, the following:

Annual Financial Statement (AFS) – Article 112
Demands for Grants (DG) – Article 113
Appropriation Bill – Artice 114(3)
Finance Bill – Article 110 (a)
Memorandum Explaining the Provisions in the Finance Bill.
Macro-economic framework for the relevant financial year – FRBM Act
Fiscal Policy Strategy Statement for the financial year – FRBM Act
Medium Term Fiscal Policy Statement – FRBM Act
Medium Term Expenditure Framework Statement – FRBM Act
Expenditure Budget Volume-1
Expenditure Budget Volume-2
Receipts Budget
Budget at a glance
Highlights of Budget

Status of Implementation of Announcements made in Finance Minister’s Budget Speech of the previous financial year.

There are also other related documents like Detailed Demands for Grants, Outcome Budget, Annual Reports and Economic Survey presented along with the budget documents in Parliament.

PS: The documents shown at Serial 1, 2, 3 and 4 are mandated by Art. 112,113, 114(3) and 110(a) of the Constitution of India respectively, while the documents at Serial 6,7, 8 and 9 are presented as per the provisions of the Fiscal Responsibility and Budget Management Act, 2003. Other documents are in the nature of explanatory statements supporting the mandated documents with narrative or other content in a user-friendly format suited for quick or contextual references. Hindi version of all these documents is also presented to Parliament.

Railway Budget

Do figures related to Railways find mention in Annual Financial Statement or are they part of only Railway budget?
Until 2016 (for 92 years), the budget of the Indian Railways was presented separately to Parliament and dealt with separately. Even then the receipts and expenditure of the Railways formed part of the Consolidated Fund of India and the figures relating to them are included in the ‘Annual Financial Statement’.
The last Railway Budget was presented on 25 February 2016 by Mr. Suresh Prabhu.

Since 2017, Railway Budget is merged with the Union Budget.

Budget Presentation

In India, the Budget is presented to Parliament on such date as is fixed by the President.
Between 1999 to 2016, the General Budget was presented at 11 A.M. on the last working day of February. However, since 2017, the Indian Budget is presented on 1 February.
In an election year, Budget may be presented twice — first to secure Vote on Account for a few months and later in full.

Vote on Account

The discussion on the Budget begins a few days after its presentation.
If the Parliament is not able to vote the entire budget before the commencement of the new financial year (ie. within 1 month or so), the necessity to keep enough finance at the disposal of Government in order to allow it to run the administration of the country remains. A special provision is, therefore, made for “Vote on Account” by which Government obtains the Vote of Parliament for a sum sufficient to incur expenditure on various items for a part of the year.
Normally, the Vote on Account is taken for two months only. But during the election year or when it is anticipated that the main Demands and Appropriation Bill will take longer time than two months, the Vote on Account may be for a period exceeding two months.

So what exactly is Vote on Account?

Vote on Account is a special provision by which the Government obtains the Vote of Parliament for a sum sufficient to incur expenditure on various items for a part of the year, usually two months.
Vote on Account was widely used along with every budget before 2016 when the date of the budget presentation was the last day of February. Now vote on account is used only in special years like the election years (used along with interim budget).
Vote on Account deals only with expenditure part. But the interim budget, as well as full budget, has both receipt and expenditure side.
So presentation and passing of vote on account is the first stage in the budget passing process. Vote on Account is necessary for the working of the government until the period the full budget is passed.

Budget Speech

The Budget speech of the Finance Minister is usually in two parts. Part A deals with the general economic survey of the country while Part B relates to taxation proposals. He makes a speech introducing the Budget and it is only in the concluding part of his speech that the proposals for fresh taxation or for variations in the existing taxes are disclosed by him. The ‘Annual Financial Statement’ is laid on the Table of Rajya Sabha at the conclusion of the speech of the Finance Minister in Lok Sabha.

UNACADEMY VIDEO ON COMPONENTS OF BUDGET FOR YOUR BETTER UNDERSTANDING......

4.Rafale jet(GS-2,3)

CONTEXT:Defence Minister Rajnath Singh to perform ‘Shastra Puja’ for Rafale jet in France
Mr. Singh will receive the first of the 36 Rafale fighter jets at a facility of Dassault Aviation in the French port city of Bordeaux.
Mr. Singh is leaving for Paris on a three-day visit, primarily to receive the first of 36 Rafale fighter jets on Tuesday when Dussehra is coinciding with the foundation day of the Indian Air Force.
Before leaving for Bordeaux on the morning of Tuesday, the minister will meet French President Emmanuel Macron in Paris and is expected to discuss issues relating to defence and security ties between the two countries.
The ceremony to hand over the Rafale jet will take place at a facility of Dassault Aviation, the makers of the aircraft, in Merignac of Bordeaux, some 590 km from Paris.
Though Mr. Singh will receive the first of 36 Rafale jets on Tuesday, the first batch of four aircraft will come to India only by May next year.

BACKGROUND:

India in September 2016 signed an Inter-Governmental Agreement (IGA) with France to procure 36 Rafale fighter jets in fly-away condition for €7.8 billion.
As a part of the contract, India will also get the latest weapons like the Meteor and Scalp missiles, besides a five-year support package that assures high availability of the fighter. Under the deal, it was decided that India will pay 15 per cent in advance.
The first Rafales are expected to be delivered by 2019, and India is set to have all 36 jets within six years.

What is Rafale?

Introduced in 2001, Rafale is a twin-engine, canard-delta wing, multirole combat aircraft designed and built by French company Dassault Aviation. The aircraft is considered one of the most potent combat jets globally.

• The fighter jet, equipped with a wide range of weapons, is intended to perform air supremacy, interdiction, aerial reconnaissance, ground support, in-depth strike, anti-ship strike and nuclear deterrence missions.

• The aircraft is fitted with an onboard oxygen generation system (OBOGS) which suppresses the need for liquid oxygen re-filling or ground support for oxygen production.

• It is capable of carrying out a wide range of missions including air-defence/air-superiority, reconnaissance, close air support dynamic targeting, air-to-ground precision strike/interdiction, anti-ship attacks, nuclear deterrence and buddy-buddy refuelling.

• It is distinct from other European fighters of its era, as it is almost entirely built by one country, involving most of France's major defence contractors, such as Dassault, Thales and Safran.

• Many of the aircraft's avionics and features, such as direct voice input, the RBE2 AA active electronically scanned array (AESA) radar and the optronique secteur frontal infra-red search and track (IRST) sensor, were domestically developed and produced for the Rafale programme.

• The aircraft is available in three main variants: Rafale C single-seat land-based version, Rafale B twin-seat land-based version and Rafale M single-seat carrier-based version.

Significance

The Rafale is referred to as an ‘omnirole’ aircraft by Dassault, as the company claims that it has the capability to perform several actions at the same time, such as firing air-to-air missiles at a very low altitude, air-to-ground and interceptions during the same sortie.

Several upgrades to the weapons and avionics of the Rafale are planned to be introduced by 2018.

Why does India need Rafale aircraft?

The Indian government felt the need to revamp its IAF fleet by introducing multi-role combat aircraft considering the prevalent security environment.

After the Kargil experience, the Indian Armed Forces and the Defence Ministry were of the opinion that the combat ability of the Indian Air Force to strike targets required radical improvement.

The Defence Ministry came to a conclusion that an aircraft adds to the combat strength of the forces only when it is loaded with the requisite weaponry, which enables it to strike targets. This need was first recorded in 2001.

Current Controversy

India’s main opposition party had raised an issue over Dassault partnering with Anil Ambani's Reliance Defence, a private company instead of state-owned HAL.

Both French government and Dassault had issued a press release stating it was Dassault's decision to choose Reliance Defence.

5.C40 Cities Climate Leadership Group(GS-3)

CONTEXT:Chief Minister Arvind Kejriwal, who is scheduled to speak at the C40 Cities Climate Summit in Copenhagen, between October 912, is yet to receive clearance from the Ministry of External Affairs (MEA) to travel abroad, Delhi government sources claimed.

C40 Cities Climate Leadership Group

The C40 Cities Climate Leadership Group (C40) is a group of 94 cities around the world that represents one twelfth of the world's population and one quarter of the global economy.Created and led by cities, C40 is focused on tackling climate change and driving urban action that reduces greenhouse gas emissions and climate risks, while increasing the health, wellbeing and economic opportunities of urban citizens.
As of 2018, Mayor of Paris Anne Hidalgo serves as the C40's Chairwoman, former Mayor of New York City Michael R. Bloomberg as President of the Board, and Mark Watts as Executive Director. All three work closely with the 13-member Steering Committee, the Board of Directors and professional staff. The rotating Steering Committee of C40 mayors provides strategic direction and governance.Steering Committee members include: Amman, Boston, Copenhagen, Durban, Hong Kong, Jakarta, London, Los Angeles, Mexico City, Milan, Paris, Seoul, and Tokyo.
Working across multiple sectors and initiative areas, C40 convenes networks of cities providing a suite of services in support of their efforts, including: direct technical assistance; facilitation of peer-to-peer exchange; and research, knowledge management & communications. C40 is also positioning cities as a leading force for climate action around the world, defining and amplifying their call to national governments for greater support and autonomy in creating a sustainable future.
C40's work is made possible by three strategic funders: Bloomberg Philanthropies, Children's Investment Fund Foundation and Realdania.

6.FATF(GS-2,3)

CONTEXT:FATF exposes Pakistan's false claims on action against terror financing
Titled Mutual Evaluation Report of Pakistan, the APG report was adopted by the group during the annual meet in Canberra, Australia in August 2019 and it has exposed Pakistan by saying that the Islamabad "has not taken sufficient" measures to fully implement UNSCR 1267obligations against all listed individuals and entities.
The Asia Pacific Group (APG) on Money Laundering, the regional affiliate of the Financial Action Task Force (FATF), has once again exposed Pakistan, saying in its report that Islamabad has failed to take credible action to stop terror financing.

Background:

Pakistan was placed on the grey list by the FATF in June for failing to curb anti-terror financing. It has been scrambling in recent months to avoid being added to a list of countries deemed non-compliant with anti-money laundering and terrorist financing regulations by the Paris-based FATF, a measure that officials here fear could further hurt its economy.

Implications of this move:

Pakistani analysts say being put on the FATF watchlist could deal a blow to Pakistan’s economy, making it harder for foreign investors and companies to do business in the country.
It would be counterproductive to put Pakistan on the watch list as it would hurt its capability to fight terrorism. Also, being put back on the grey list would heighten Pakistan’s risk profile and some financial institutions would be wary of transacting with Pakistani banks and counterparties.
Being placed on the FATF watchlist carries no direct legal implications but brings extra scrutiny from regulators and financial institutions that can chill trade and investment and increase transaction costs.

About FATF:

What is it? The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 on the initiative of the G7. It is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in various areas. The FATF Secretariat is housed at the OECD headquarters in Paris.

Objectives: The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.

Functions: The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures and promotes the adoption and implementation of appropriate measures globally. In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse.

What is blacklist and grey list?

FATF maintains two different lists of countries: those that have deficiencies in their AML/CTF regimes, but they commit to an action plan to address these loopholes, and those that do not end up doing enough. The former is commonly known as grey list and latter as blacklist.
Once a country is blacklisted, FATF calls on other countries to apply enhanced due diligence and counter measures, increasing the cost of doing business with the country and in some cases severing it altogether. As of now there are only two countries in the blacklist — Iran and North Korea — and seven on the grey list, including Pakistan, Sri Lanka, Syria and Yemen.

DCA

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