Who is the Financial Action Task Force (FATF)?
The Financial Action Task Force (FATF) was formed in 1989 by the the Group of Seven nations (“G7”) to create a intergovernmental body who seek to address the threat of money laundering through the promotion and implementation of legal, regulatory and operational measures to counter money laundering. This includes a number of ‘recommendations’ to be adopted by members - and these are recognised as the international standard for combating money laundering, financing of terrorism and financing of proliferation of weapons of mass destruction.
At the time of formation, FATF had 16 members who adopted their recommendation. This has now grown to 37 due to the effectiveness of the recommendations and also the demand of risk-aware investors who prefer to deal with jurisdictions that are perceived as taking the threat of financial crime seriously. Therefore, being a member of the FATF community has a positive economic impact when it comes to international investment.
In addition to full members, there are ‘Associate Members' who carry out a similar agenda of setting up systems to fight terrorism and money corruption within defined global regions. For example; the Asia/Pacific Group on Money Laundering (APG), Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).
There are also a number of ‘Observers’ of FATF such as the Basel Committee on Banking Supervision (BCBS) and the United Nations office of Drugs and Crime (UNODC).
In its first year, FATF issued a report containing forty recommendations to identify, prevent, suppress and disrupt money laundering. These standards were revised in 2003 to address evolving criminal patterns and techniques.
In 2012, driven by the events of September 11 and subsequent terrorist activity, the FATF expanded its mandate to cover the financing of terrorism and again updated their recommendations once more to include guidelines to counter the proliferation of weapons of mass destruction.
The FATF require member countries to (amongst other things):
Criminalise money laundering and enable authorities to confiscate the proceeds of money laundering
Establish a financial intelligence unit to receive and disseminate suspicious transaction reports
Cooperate internationally in investigating and prosecuting money launderingInvoke due diligence activities to ensure transparency of legal persons
Undertake enhance due diligence on customers who present a heightened risk
FATF High Risk & Non-Cooperative Countries or Territories (NCCTs)
In addition to recommendations, three time a year the FATF publish two key documents
FATF Public Statement: This document identifies countries or jurisdictions with such serious strategic deficiencies that the FATF calls on its members and non-members to apply counter-measures or apply enhanced due diligence measures
FATF Improving Global AML/CFT Compliance Statement: This document identifies countries or jurisdictions with strategic weaknesses in their AML/CFT measures but that have provided a high-level commitment to an action plan developed with the FATF. If a country fails to make sufficient or timely progress, the FATF can decide to increase its pressure on the country to make meaningful progress by moving it to the Public Statement.