The 101: FATF – Financial Action Task Force

The Financial Action Task Force (FATF) is an intergovernmental organization established in 1989 by the G7 nations to develop policies to combat money laundering. In 2001, its mandate expanded to include efforts to combat terrorist financing.

The main goal of FATF is 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.

Recommendations: FATF has developed a series of recommendations that are recognized as the international standard for combating money laundering and the financing of terrorism and proliferation. These recommendations set out a comprehensive and consistent framework of measures which countries should implement.

The FATF Recommendations provide a comprehensive framework of measures to help countries tackle illicit financial flows.

The 40 Recommendations are divided into seven distinct areas: 

• AML/CFT Policies and coordination
• Money laundering and confiscation
• Terrorist financing and financing of proliferation
• Preventive measures
• Transparency and beneficial ownership of legal persons and arrangements
• Powers and responsibilities of competent authorities and other institutional measures
• International cooperation 

Here is an overview of the 40 Recommendations:

A. AML/CFT Policies and Coordination

1. Assessing risks and applying a risk-based approach
2. National cooperation and coordination

B. Money Laundering and Confiscation

3. Money laundering offence
4. Confiscation and provisional measures

C. Terrorist Financing and Financing of Proliferation

5. Terrorist financing offence
6. Targeted financial sanctions related to terrorism & terrorist financing
7. Targeted financial sanctions related to proliferation
8. Non-profit organisations

D. Preventive Measures

9. Financial institution secrecy laws
10. Customer due diligence
11. Record keeping
12. Politically exposed persons (PEPs)
13. Correspondent banking
14. Money or value transfer services
15. New technologies
16. Wire transfers
17. Reliance on third parties
18. Internal controls and foreign branches and subsidiaries
19. Higher-risk countries
20. Reporting of suspicious transactions
21. Tipping-off and confidentiality
22. DNFBPs (Designated Non-Financial Businesses and Professions): Customer due diligence
23. DNFBPs: Other measures

E. Transparency and Beneficial Ownership of Legal Persons and Arrangements

24. Transparency and beneficial ownership of legal persons
25. Transparency and beneficial ownership of legal arrangements

F. Powers and Responsibilities of Competent Authorities and Other Institutional Measures

26. Regulation and supervision of financial institutions
27. Powers of supervisors
28. Regulation and supervision of DNFBPs
29. Financial intelligence units (FIU)
30. Responsibilities of law enforcement and investigative authorities
31. Powers of law enforcement and investigative authorities
32. Cash couriers
33. Statistics
34. Guidance and feedback
35. Sanctions

G. International Cooperation

36. International instruments
37. Mutual legal assistance
38. Mutual legal assistance: freezing and confiscation
39. Extradition
40. Other forms of international cooperation

These recommendations are intended to provide a consistent framework for countries to implement measures to fight financial crimes effectively. They encompass a wide range of actions, from legislative and regulatory measures to operational and enforcement strategies.

Evaluations and Monitoring: FATF monitors the progress of its members in implementing necessary measures and evaluates how effectively countries are doing so through peer reviews called Mutual Evaluations.

Global Network: While initially a group of G7 countries, FATF has expanded to include 39 members, including major financial centers around the world. It also works closely with various regional bodies and international organizations.

Publications and Guidance: FATF publishes various reports, typologies, and guidance documents to help countries and financial institutions understand and implement effective measures to combat money laundering and terrorist financing.

Grey and Black Lists: FATF identifies jurisdictions with strategic deficiencies in their anti-money laundering and counter-terrorist financing measures. Countries are placed on the “grey list” (under increased monitoring) or “black list” (non-cooperative jurisdictions).
FATF plays a critical role in maintaining the integrity of the global financial system by ensuring that financial institutions and governments adhere to high standards of transparency and accountability.