Financial Action Task Force
(FATF)

The Financial Action Task Force (FATF) is an international policy-making body of 37 member countries established to protect the international financial system. After its inception in 1989, the organisation set out a basic framework for combating money laundering and terrorist financing. This has been emulated by other countries around the world. The FATF makes an ongoing effort to devise measures and update recommendations with the aim of preventing the use of the financial systems by criminals. It has emerged as a global money-laundering and terror financing watchdog.

Role of the FATF

The FATF was originally formed to create the necessary political will for legislative and regulatory reforms to prevent the misuse of financial systems. It set into motion a regulatory mechanism with 40 recommendations that laid the foundations of AML/CTF regulations across the world.

The FATF monitors the progress of member countries in implementing the necessary measures and techniques based on its Recommendations.  It lays down the guidelines for financial and non-financial companies, and makes suggestions for best practices of compliance. At the same time, it adopts the role of an umbrella organisation for promotion and implementation of appropriate measures to fight money laundering on a global level. The Task Force collaborates with other international bodies for policy discussions concerning the emergence of new money laundering schemes using new technologies and platforms.

The FATF also works together with the Organisation for Economic Co-operation and Development (OECD) whose prime objective is to stimulate economic progress, world trade, and prevent tax crime. Periodically they arrive at a consensus on Black Lists, to enforce AML/CTF regulatory compliance.

The Task Force reviews its mission every five years, and updates its guidelines based on new business models and financial crime potential.

 

What are the Financial Action Task Force Recommendations?

The Financial Action Task Force Recommendations are global standards and ongoing compliance measures against money laundering and terrorist financing. They set out a comprehensive framework of measures which countries must implement to combat money laundering and financing of weapons of mass destruction. As countries have diverse legal and administrative systems, the FATF through its Recommendations sets a universal benchmark.  Member countries and other jurisdictions implement these Recommendations through measures adapted to their individual country.

There are 40 FATF Recommendations that set out the core measures that countries must have in place to:  identify risks and develop appropriate  policies;  pursue measures to prevent money laundering and terrorist financing;  apply preventive methods in the financial sector and other designated high-risk sectors;  establish powers and responsibilities for concerned authorities;  improve transparency and availability of beneficial ownership information; and facilitate international cooperation.

What is the FATF/OECD blacklist?

The FATF and the OECD, issue a publicly available list of “Non-Cooperative Countries or Territories” (NCCTs) perceived to be non-cooperative in the global fight against money laundering and terrorist financing. The list includes the OECD blacklist of “uncooperative tax havens” as well as jurisdictions with weak measures to combat money laundering and terrorist financing. The FATF has not reviewed any new jurisdictions sicne 2001 in the framework of the NCCT initiative.

Two FATF public documents are issued three times a year with updates, and indicate countries on the Watchlist or Greylist as a warning mechanism.