General Studies · Anti-Money Laundering and International Standards
Which statement provides the deepest conceptual understanding of the legal difference between the FATF Recommendations and the UN Security Council Resolutions (UNSCRs) concerning obligations under International Agreements for an Indian bank, particularly concerning Terrorist Financing (TF) and Proliferation Financing (PF)?
- 1Compliance with FATF Recommendations is voluntary for private banks, whereas compliance with UNSCRs is mandatory only for Public Sector Banks (PSBs) via a specific government notification.
- 2FATF Recommendations primarily address money laundering, while UNSCRs are the sole source of international obligations related to proliferation financing (PF).
- 3FATF Recommendations are soft law standards adopted through international consensus, while relevant UNSCRs (e.g., UNSCR 1267, 1373) are hard law obligations that mandate the immediate imposition of targeted financial sanctions on designated individuals/entities.✓
- 4FATF Recommendations are legally binding as they are codified in the PMLA, 2002, whereas UNSCRs are only advisory guidelines that the RBI may choose to adopt.
Correct answer
FATF Recommendations are soft law standards adopted through international consensus, while relevant UNSCRs (e.g., UNSCR 1267, 1373) are hard law obligations that mandate the immediate imposition of targeted financial sanctions on designated individuals/entities.
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