Financial Action Task Force on Money Laundering

The Financial Action Task Force (FATF) is an intergovernmental organization founded in 1989 on the initiative of the G7 countries to develop policies and standards for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. The FATF currently comprises 37 member jurisdictions and 2 regional organizations, representing most major financial centres in all parts of the globe.

History

The FATF was established in July 1989 during the G7 Summit in Paris, initially to examine and develop measures to combat money laundering. In October 2001, following the 9/11 terrorist attacks in the United States, the FATF expanded its mandate to incorporate efforts to combat terrorist financing. In April 2012, the FATF’s mandate was further extended to address the financing of proliferation of weapons of mass destruction.

Recommendations

The FATF has developed a series of Recommendations that are recognized as the international standard for combating money laundering, terrorist financing, and the proliferation of weapons of mass destruction. The FATF Recommendations, originally issued in 1990 and revised in 1996, 2001, 2003, and most recently in 2012, set out a comprehensive framework of measures that countries should implement to combat these illicit activities.

The Recommendations cover a wide range of topics, including:

• Criminalization of money laundering and terrorist financing
• Confiscation and provisional measures
• Customer due diligence and record-keeping requirements for financial institutions and designated non-financial businesses and professions
• Reporting of suspicious transactions
• Regulation and supervision of financial institutions and designated non-financial businesses and professions
• International cooperation, including mutual legal assistance and extradition
• Transparency of legal persons and arrangements

Mutual Evaluations

The FATF conducts periodic peer reviews, known as mutual evaluations, of its members to assess their compliance with the FATF Recommendations and the effectiveness of their anti-money laundering and counter-terrorist financing (AML/CFT) systems. Mutual evaluations are carried out by teams of experts from FATF member jurisdictions and regional bodies. The evaluation reports, which are published on the FATF website, provide a detailed analysis of each country’s AML/CFT framework and identify areas for improvement.

High-Risk and Non-Cooperative Jurisdictions

The FATF identifies and monitors jurisdictions with weak AML/CFT measures that pose a risk to the international financial system. These jurisdictions, known as “high-risk and non-cooperative jurisdictions,” are subject to enhanced scrutiny and may face countermeasures if they fail to address their deficiencies. The FATF publishes and regularly updates public statements on these jurisdictions to alert the international community to the risks they pose.

Observer Organizations

In addition to its member jurisdictions, the FATF has several observer organizations, including the International Monetary Fund (IMF), the World Bank, the United Nations Office on Drugs and Crime (UNODC), and the Egmont Group of Financial Intelligence Units. These organizations contribute to the work of the FATF and help to promote the global implementation of the FATF Recommendations.

FATF-Style Regional Bodies

The FATF has also fostered the establishment of nine FATF-Style Regional Bodies (FSRBs) that promote the implementation of the FATF Recommendations in their respective regions. These bodies, which cover more than 200 jurisdictions, include:

• Asia/Pacific Group on Money Laundering (APG)
• Caribbean Financial Action Task Force (CFATF)
• Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL)
• Eurasian Group (EAG)
• Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)
• Financial Action Task Force of Latin America (GAFILAT)
• Inter-Governmental Action Group against Money Laundering in West Africa (GIABA)
• Middle East and North Africa Financial Action Task Force (MENAFATF)
• Task Force on Money Laundering in Central Africa (GABAC)

The FSRBs work closely with the FATF to ensure a consistent global approach to combating money laundering, terrorist financing, and the financing of proliferation.

Impact and Significance

The FATF has played a crucial role in setting global standards for AML/CFT and has contributed significantly to the development of effective AML/CFT frameworks worldwide. The FATF Recommendations have been endorsed by over 200 jurisdictions and are widely recognized as the international benchmark for AML/CFT measures.