Financial Action Task Force on Money Laundering
|Purpose||Combat money laundering and terrorism financing|
|Roger Wilkins |
|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 to develop policies to combat money laundering. In 2001 the purpose expanded to act on terrorism financing. It monitors countries' progress in implementing the FATF Recommendations by ‘peer reviews’ (‘mutual evaluations’) of member countries. The FATF Secretariat is housed at the headquarters of the OECD in Paris.
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In response to mounting concern over money laundering, the Financial Action Task Force on Money Laundering (FATF) was established by the G-8 Summit that was held in Paris in 1989. Recognising the threat posed to the banking system and to financial institutions, the G-8 Heads of State or Government and President of the European Commission convened the Task Force from the G-8 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 36 members.
The 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 completely revised the Forty Recommendations in 1996 and 2003. The 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. 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[which?] 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. The FATF issued a ninth Special Recommendation on Terrorism Financing in October 2004. 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.
Types of Members
As of 2015[update] FATF consists of thirty-four member jurisdictions and two regional organisations, the EU and the Gulf Co-operation Council. 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
As of 2015[update] there are 8 associate members:
- Asia/Pacific Group on Money Laundering (APG)
- Caribbean Financial Action Task Force (CFATF)
- Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)
- Eurasian Group (EAG)
- Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Landering Measures (MONEYVAL)(formerly PC-R-EV)
- Financial Action Task Force of Latin America (GAFILAT), formerly The Financial Action Task Force on Money Laundering in South America (GAFISUD)
- Inter-Governmental Action Group against Money Laundering in West Africa (GIABA)
- Middle East and North Africa Financial Action Task Force (MENAFATF)
- "FATF - Presidency". FATF.
- "Error:- 404 - Financial Action Task Force (FATF)". fatf-gafi.org.[dead link]
- "Error:- 404 - Financial Action Task Force (FATF)". fatf-gafi.org.[dead link]
- "INTERNATIONAL STANDARDS ON COMBATING MONEY LAUNDERING AND THE FINANCING OF TERRORISM & PROLIFERATION. FATF Recommendations" (pdf) (in 16 February 2012). FATF/OECD. p. 130. Retrieved 23 March 2015.
- "FATF Members and Observers". FATF. Retrieved October 6, 2014.
- "Asia / Pacific Group On Money Laundering". Asia / Pacific Group. Retrieved 23 March 2015.
- "Caribbean Financial Action Task Force". Caribbean Financial Action Task Force (CFATF). Retrieved 23 March 2015.
- "Eastern and Southern Africa Anti-Money Laundering Group-Home". esaamlg.org.
- "The Eurasian Group on Combating Money Laundering and Financing of Terrorism". eurasiangroup.org.
- "Moneyval". council of Europe.
- "GAFILAT". Retrieved 22 March 2015.
- "GIABA - Welcome !". Retrieved 22 March 2015.
- MENAFATF retrieved 22 March 2015
- Official website
- Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG) FATF-Style Regional Bodies