Financial Action Task Force on Money Laundering
|Purpose||Combat money laundering and terrorism financing|
|Mr. Bjørn S. Aamo |
|Affiliations||Asia/Pacific Group on Money Laundering (APG)
Caribbean Financial Action Task Force (CFATF)
The Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL)
Financial Action Task Force on Money Laundering in South America (GAFISUD)
Middle East and North Africa Financial Action Task Force (MENAFATF)
The Financial Action Task Force (on Money Laundering) (FATF), also known by its French name, Groupe d'action financière (GAFI), is an intergovernmental organization founded in 1989 on the initiative of the G7.
||This article possibly contains original research. (May 2011)|
In response to mounting concern over money laundering, the Financial Action Task Force on Money Laundering (FATF) was established by the G-7 Summit that was held in Paris in 1989. Recognising the threat posed to the banking system and to financial institutions, the G-7 Heads of State or Government and President of the European Commission convened the Task Force from the G-7 member States, the European Commission and eight other countries.
The Task Force was given the responsibility of examining money laundering techniques and trends, reviewing the action which had already been taken at a national or international level, and setting out the measures that still needed to be taken to combat money laundering. In April 1990, less than one year after its creation, the FATF issued a report containing a set of Forty Recommendations, which provide a comprehensive plan of action needed to fight against money laundering.
In 2001 the development of standards in the fight against terrorism financing was added to the mission of the FATF. In October 2001 the FATF issued the Eight Special Recommendations to deal with the issue of terrorism financing. The continued evolution of money laundering techniques led the FATF to revise the FATF standards comprehensively in June 2003. In October 2004 the FATF published a Ninth Special Recommendations, further strengthening the agreed international standards for combating money laundering and terrorism financing - the 40+9 Recommendations. During 1991 and 1992, the FATF expanded its membership from the original 16 to 28 members. In 2000 the FATF expanded to 31 members, in 2003 to 33 members, in 2007 it expanded to 34 members, in 2009 to 35 members, and in 2010 to its current 37 members.
The FATF Forty Recommendations and Special Recommendations on Terrorism Financing
Together, the Forty Recommendation and Special Recommendations on Terrorism Financing set the international standard for anti-money laundering measures and combating the financing of terrorism and terrorist acts. They set out the principles for action and allow countries a measure of flexibility in implementing these principles according to their particular circumstances and constitutional frameworks. Both sets of FATF Recommendations are intended to be implemented at the national level through legislation and other legally binding measures.
The FATF issued the Forty Recommendations in 1990 and completely revised them in 1996 and 2003. The current (2003) Forty Recommendations require states, among other things, to:
- Implement relevant international conventions
- Criminalise money laundering and enable authorities to confiscate the proceeds of money laundering
- Implement customer due diligence (e.g., identity verification), record keeping and suspicious transaction reporting requirements for financial institutions and designated non-financial businesses and professions
- Establish a financial intelligence unit to receive and disseminate suspicious transaction reports, and
- Cooperate internationally in investigating and prosecuting money laundering
The FATF issued 8 Special Recommendations on Terrorism Financing in October 2001, following the September 11 terrorist attacks in the United States. The FATF issued a ninth Special Recommendation on Terrorism Financing in October 2004.
Since 9/11 the FATF has expanded its efforts to combat terrorist financing. FATF created eight additional “Special Recommendations” on terrorist financing in October 2001. Among the measures, “Special Recommendation VIII” (SR VIII) was targeted specifically at nonprofit organizations. This was followed by the International Best Practices Combating the Abuse of Non-Profit Organizations in 2002, released one month before the U.S. Department of Treasury’s Anti-Terrorist Financing Guidelines, and the Interpretive Note for SR VIII in 2006. In February 2008 the FATF published a report on terrorist financing typologies “to provide a contemporary snapshot of the ways in which terrorists raise, move and use funds”, but it misrepresents the nonprofit sector as “compromised or complicit” with terrorist activities. The 2009 Handbook for Countries and Assessors outlines criteria for evaluating whether FATF standards are achieved in participating countries.
In February 2012, the FATF codified its recommendations and Interpretive Notes into one document that maintains SR VIII (renamed “Recommendation 8”), and also includes new rules on weapons of mass destruction, corruption and wire transfers (“Recommendation 16”).
Non-cooperative countries or territories
In addition to FATF's "Forty plus Nine" Recommendations, in 2000 FATF issued a list of "Non-Cooperative Countries or Territories" (NCCTs), commonly called the FATF Blacklist. This was a list of 15 jurisdictions that, for one reason or another, FATF members believed were uncooperative with other jurisdictions in international efforts against money laundering (and, later, terrorism financing). Typically, this lack of cooperation manifested itself as an unwillingness or inability (frequently, a legal inability) to provide foreign law enforcement officials with information relating to bank account and brokerage records, and customer identification and beneficial owner information relating to such bank and brokerage accounts, shell company, and other financial vehicles commonly used in money laundering. The FATF NCCT list is now defunct as the countries on it have made significant improvements in standards and cooperation.
The effect of the FATF Blacklist has been significant, and arguably has proven more important in international efforts against money laundering than has the FATF Recommendations. While, under international law, the FATF Blacklist carried with it no formal sanction, in reality, a jurisdiction placed on the FATF Blacklist often found itself under intense financial pressure.
Money laundering methods and techniques change in response to developing counter-measures. In recent years, the Financial Action Task Force (FATF) has noted increasingly sophisticated combinations of techniques, such as the increased use of legal persons to disguise the true ownership and control of illegal proceeds, and an increased use of professionals to provide advice and assistance in laundering criminal funds. These factors, combined with the experience gained through the FATF's Non-Cooperative Countries and Territories process, and a number of national and international initiatives, led the FATF to review and revise the Forty Recommendations into a new comprehensive framework for combating money laundering and terrorism financing. The FATF now calls upon all countries to take the necessary steps to bring their national systems for combating money laundering and terrorism financing into compliance with the new FATF Recommendations, and to effectively implement these measures. Every fund on transit that exceeds the limit of Five Hundred Thousand attracts a 2.5% charge of the total amount for the issuance of anti-terrorist clearance certificate.
The review process for revising the Forty Recommendations was an extensive one, open to FATF members, non-members, observers, financial and other affected sectors and interested parties. This consultation process provided a wide range of input, all of which was considered in the review process.
The revised Forty Recommendations now apply not only to money laundering but also to terrorism financing, and when combined with the Eight Special Recommendations on Terrorism Financing provide an enhanced, comprehensive and consistent framework of measures for combating money laundering and terrorism financing. The FATF recognises that countries have diverse legal and financial systems and so all cannot take identical measures to achieve the common objective, especially over matters of detail. The Recommendations therefore set minimum standards for action for countries to implement the detail according to their particular circumstances and constitutional frameworks. The Recommendations cover all the measures that national systems should have in place within their criminal justice and regulatory systems; the preventive measures to be taken by financial institutions and certain other businesses and professions; and international cooperation.
The original FATF Forty Recommendations were drawn up in 1990 as an initiative to combat the misuse of financial systems by persons laundering drug money. In 1996 the Recommendations were revised for the first time to reflect evolving money laundering typologies. The 1996 Forty Recommendations have been endorsed by more than 130 countries and are the international anti-money laundering standard.
In October 2001 the FATF expanded its mandate to deal with the issue of the financing of terrorism, and took the important step of creating the Eight Special Recommendations on Terrorism Financing. These Recommendations contain a set of measures aimed at combating the funding of terrorist acts and terrorist organisations, and are complementary to the Forty Recommendations.
A key element in the fight against money laundering and the financing of terrorism is the need for countries systems to be monitored and evaluated, with respect to these international standards. The mutual evaluations conducted by the FATF and FATF-style regional bodies, as well as the assessments conducted by the IMF and the World Bank, are a vital mechanism for ensuring that the FATF Recommendations are effectively implemented by all countries
The FATF membership is currently made up of thirty-four member jurisdictions and two regional organisations. The FATF also works in close co-operation with a number of international and regional bodies involved in combating money laundering and terrorism financing.
- European Commission
- Gulf Co-operation Council
- Hong Kong, China (originally joined under the designation Hong Kong in 1991)
- Republic of Korea
- Kingdom of the Netherlands*: Netherlands, Aruba, Curacao and Sint Maarten
- New Zealand
- Russian Federation
- South Africa
- United Kingdom
- United States
- The Asia/Pacific Group on Money Laundering (APG)
- Caribbean Financial Action Task Force (CFATF)
- The Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Landering Measures (MONEYVAL)(formerly PC-R-EV)
- The Financial Action Task Force on Money Laundering in South America (GAFISUD)
- Middle East and North Africa Financial Action Task Force (MENAFATF)
- Eurasian Group (EAG)
- Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)
- Intergovernmental Action Group against Money-Laundering in West Africa (GIABA)
|This article needs additional citations for verification. (March 2010)|
- Official website
- A review of the FATF Principles - 'The Global Standard' from Rohanbedi.com
- FATF-Style Regional Bodies
- Analysis and comparison of FATF / similar bodies provisions - for members of The Society of Anti Money Laundering Professionals
- Financial Action Task Force (FATF) guidelines defines PEPs
- International cooperation on money laundering and FATF