Organization:Financial Action Task Force on Money Laundering

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Financial Action Task Force
File:Financial Action Task Force Logo.png
AbbreviationFATF
TypeIntergovernmental organization
PurposeCombat money laundering and terrorism financing
HeadquartersParis, France
Region served
Worldwide
Membership
39
Official language
English, French
Xiangmin Liu[1]
AffiliationsAsia/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)
Websitewww.fatf-gafi.org

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.[2] In 2001 its mandate expanded to include terrorism financing. It monitors progress in implementing the FATF Recommendations through "peer reviews" ("mutual evaluations") of member countries. The FATF Secretariat is housed at the OECD headquarters in Paris.The objectives of the FATF are 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. The FATF is, therefore, a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.[3]

Since 2000, to fight money laundering and terror financing the FATF maintains the current list of nations: FATF blacklist (formally called the "Call for action") and the "FATF greylist" (formally called the '"Other monitored jurisdictions").[4][5][6][7]

History

FATF was formed by the 1989 G7 Summit in Paris to combat the growing problem of money laundering. The task force was charged with studying money laundering trends, monitoring legislative, financial and law enforcement activities taken at the national and international level, reporting on compliance, and issuing recommendations and standards to combat money laundering. At the time of its formation, FATF had 16 members, which by 2016 had grown to 37.

In its first year, FATF issued a report containing forty recommendations to more effectively fight money laundering. These standards were revised in 2003 to reflect evolving patterns and techniques in money laundering.

The mandate of the organisation was expanded to include terrorist financing following the September 11 terror attacks in 2001. FATF is seen as the Lender of the Last Resort for curbing Terror funding,Globally.

FATF Secretariat

The FATF Secretariat is led by the Executive Secretary, who is responsible for delivering and coordinating any work on money laundering as well as countering the financing of terrorism and the increase of weapons of mass destruction.[8] This job oversees the FATF network which consists of 205 jurisdictions.[8]

The current Executive Secretary is David Lewis, he became Executive Secretary in November 2015.[8]

Total 48 recommendations for compliance

Creation and ongoing maintenance

Together, the Forty Recommendations on Money Laundering and eight 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.[9] There are multiple groups to organize the Recommendations; AML/CFT Policies and Coordination, Money Laundering and Confiscation, Terrorist Financing and Financial of Proliferation, Preventive Measures, Transparency and Beneficial Ownership of Legal Persons and Arrangements, Powers and Responsibilities of Competent Authorities and other Institutional Measures, and International Cooperation.[10]

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”).[11]

Forty recommendations on Money Laundering

The FATF's primary policies issued are the Forty Recommendations on money laundering from 1990 [12] and the Nine Special Recommendations (SR) on Terrorism Financing (TF).[13] The Recommendations are seen globally as the world standard in anti-money laundering as well many countries have made a commitment to put the Forty Recommendations in place. The Recommendations cover the criminal justice system and law enforcement, international co-operation, and the financial system and its regulation.[14] The FATF completely revised the Forty Recommendations in 1996 and 2003.[12] By 1996 the Recommendations had to be updated to include more than just drug-money laundering, as well as to keep up with changing techniques.[15] 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

Eight Special Recommendations on Terrorism Financing

In 2010 the special recommendations on Terrorist Financing were created, originally when created there were 8 Special Recommendations, later a ninth was added.[15] It was not until 2003 that the Recommendations, as well as the 9 Special Recommendations were adjusted for the second time.[15] The recommendations, and Special Recommendations have been advocated by over 180 countries.[15] The FATF issued eight Special Recommendations on Terrorism Financing in October 2001,[citation needed] 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.

Compliance mechanism

In February 2004 (Updated as of February 2009) the FATF published a reference document Methodology for Assessing Compliance with the FATF 40 Recommendations and the FATF 9 Special Recommendations.[16] The 2009 Handbook for Countries and Assessors outlines criteria for evaluating whether FATF standards are achieved in participating countries.[17] FATF evaluates a country’s performance based on its assessment methodology that covers: 1. technical compliance, which is about legal and institutional framework and the powers and procedures of the competent authorities, and 2. effectiveness assessment, which is about the extent to which the legal and institutional framework is producing the expected results.[18]

There are many differences between countries dealing with their legal and financial system, which is taking into consideration by the FATF. There is a set minimum of actions that meet a standard, that all countries can use regarding their own situation. This standard covers all actions that a nation should have within their regulatory systems and their criminal justice systems as well the preventive measures that should be taken by specified businesses, professions, and institutions.[19]

For Non-Profit Organizations (NPOs) there has been a command for more financial transparency, to make sure that they do not become easier for terrorist organizations to launder money through the organizations. This hypothesis was thought of by intergovernmental organizations. These intergovernmental organizations include the World Bank,Organization for Economic Cooperation and Development (OECD)and, the International Monetary Fund (IMF).[20] Non-Profit Organizations are put under surveillance, especially when they are associated with "suspect communities" or if they are based or working in zones of conflict.[21]

Black/greylisting of non-compliant nations

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. As of October 2006, there are no Non-Cooperative Countries and Territories in the context of the NCCT initiative. However FATF issues updates as countries on High-risk and non-cooperative jurisdictions list have made significant improvements in standards and cooperation. The FATF also issues updates to identify additional jurisdictions that pose Money Laundering/Terrorist Financing risks.[22]

The FATF surveyed 26 jurisdictions to check their ability and willingness to co-operate with other countries in the international fight against money laundering. The Review contained the summaries of these surveys. Fifteen jurisdictions were branded “non-cooperative countries or territories,” because of the high number of harmful practices identified in these jurisdictions.[23]

Types of Members

As of June 2019 there are 37 Member countries of FATF and policies drafted by FATF are highly regarded and treated as law. Starting with its own members, the FATF monitors countries' progress in implementing the FATF Recommendations; reviews money laundering and terrorist financing techniques and counter-measures; and, promotes the adoption and implementation of the FATF Recommendations globally.[24] Countries are subjected to evaluation by FATF to see that they are upholding laws and regulations enforced by FATF.

Full members

(As of 2019) FATF consists of thirty-seven 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.[25]

Regional organisations
  1.  European Commission
  2. Gulf Cooperation Council


Nations
  1.  Argentina
  2.  Australia
  3.  Austria
  4.  Belgium
  5.  Brazil
  6.  Canada
  7.  China
  8.  Denmark
  9.  Finland
  10.  France
  11.  Germany
  12.  Greece
  13.  Hong Kong, China (originally joined under the designation  Hong Kong in 1991)
  14.  Iceland
  15.  India
  16.  Ireland
  17.  Israel
  18.  Italy
  19.  Japan
  20.  South Korea
  21.  Kingdom of the Netherlands (comprises  Netherlands,  Aruba,  Curacao and  Sint Maarten)
  22.  Luxembourg
  23.  Malaysia
  24.  Mexico
  25.  New Zealand
  26.  Norway
  27.  Portugal
  28.  Russian Federation
  29.  Saudi Arabia[26]
  30.  Singapore
  31.  South Africa
  32.  Spain
  33.  Sweden
  34.   Switzerland
  35.  Turkey
  36.  United Kingdom
  37.  United States


Associate members

These members all carry out the similar agenda of setting up systems to fight terrorism and money corruption.[27]

Asia/Pacific Group on Money Laundering (APG) Caribbean Financial Action Task Force (CFATF) Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) Eurasian Group (EAG) Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) Financial Action Task Force of Latin America (GAFILAT)  Inter Governmental Action Group against Money Laundering in West Africa (GIABA) Middle East and North Africa Financial Action Task Force (MENAFATF) Task Force on Money Laundering in Central Africa (GABAC)

(As of 2015) there are 8 associate members:


  • Asia/Pacific Group on Money Laundering (APG)[28]
  • Caribbean Financial Action Task Force (CFATF)[29]
  • Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)[30]
  • Eurasian Group (EAG)[31]
  • Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL)(formerly PC-R-EV)[32]
  • Financial Action Task Force of Latin America (GAFILAT), formerly The Financial Action Task Force on Money Laundering in South America (GAFISUD)[33]
  • Inter-Governmental Action Group against Money Laundering in West Africa (GIABA)[34]
  • Middle East and North Africa Financial Action Task Force (MENAFATF)[35]


Observer members

30 countries and international organisations including for example the International Monetary Fund, the UN with six expert groups and the World Bank are observer organisations.[36]

Saudi Arabia and Indonesia joined the group of observers that take part in upholding law against money laundering, terrorism and illegal funding. The international organisations recorded have, among other objectives, a specific anti-money laundering aim or function.[37]


  • African Development Bank[37]
  • Anti-Money Laundering Liaison Committee of the Franc Zone (CLAB) [French][37]
  • Asian Development Bank[37]
  • Basel Committee on Banking Supervision (BCBS)[37]
  • Camden Asset Recovery Inter-agency Network (CARIN)[37]
  • Egmont Group of Financial Intelligence Units[37]
  • European Bank for Reconstruction and Development (EBRD)[37]
  • United Nations Office on Drugs and Crime (UNODC)[38]
  • United Nations Counter-Terrorism Committee Executive Directorate (UNCTED)[38]


Evaluating members

There are still compliance issues in areas that might afford exploitative opportunities for transnational crime and terrorist networks.This can have detrimental effects on a country's national security through increasing risks of money laundering and financing of terrorism as well as wastage due to the implementation of inappropriate regulatory measures. The objective is to increase mitigation strategies that would enable scarce resources in fighting money laundering and terrorism financing threats.[39]

The organization follows a strict criteria used to identify potential threats.[40]

Effects of FATF

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.[41]

The Financial Action Task Force began to become a big figure shortly after the detrimental 9/11 attacks to help combat the financing of terrorist organizations. This Task Force make sure funds are not easily accessible to terror organizations that are causing these heinous crimes against humanity. FATF has helped to fight against corruption by ‘grey-listing’ countries that do not meet Recommended Criteria and this helps to cripple economies and states that are aiding with terrorist and corrupted organizations.[42] FATF continues to work with other monetary agencies to control terrorist finance activity and to bring an end to illegal financial organizations, terrorism and corruption.

FATF has made it difficult for NGOs in countries to access funds to aid in relief situations due to strict FATF criteria. The FATF criteria have mainly impacted NGOS that are located in Middle Eastern and terror-ridden countries. Some argue that the Recommendations set out by FATF does not specifically state out restrictions for NGO's which often results in them going against FATF Recommendation.[43]

See also

References

Citations

  1. ↑ "FATF – Presidency". FATF-gafi.org. http://www.fatf-gafi.org/about/fatfpresidency//. Retrieved 2018-06-30. 
  2. ↑ The FATF in the Global Financial Architecture: Challenges and Implications. International, Transnational & Comparative Law Journal. Social Science Research Network (SSRN). Accessed 4 April 2019.
  3. ↑ https://www.fatf-gafi.org/about/
  4. ↑ FATF nations, Full member nations, Observer nations, Call for action nations (Blacklisted nations), Other monitored jurisdictions (greylisted nations), FATF, accessed 24 October 2019.
  5. ↑ "About FATF". FATF. http://www.fatf-gafi.org/about/. Retrieved 1 May 2018. 
  6. ↑ The FATF in the Global Financial Architecture: Challenges and Implications. International, Transnational & Comparative Law Journal. Social Science Research Network (SSRN). Accessed 4 April 2019
  7. ↑ "FATF Works". FATF. http://www.fatf-gafi.org/about/whatwedo/. Retrieved 1 May 2018. 
  8. ↑ 8.0 8.1 8.2 "FATF Secretariat - Financial Action Task Force (FATF)". http://www.fatf-gafi.org/about/fatfsecretariat/. 
  9. ↑ "National money laundering and terrorist financing risk assessment". FATF-GAFI. http://www.fatf-gafi.org/documents/guidance/nationalmoneylaunderingandterroristfinancingriskassessment.html. Retrieved 25 June 2015. 
  10. ↑ "International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation". October 2018. http://www.fatf-gafi.org/media/fatf/documents/brochuresannualreports/FATF%20annual%20report%202011%202012%20website.pdf. 
  11. ↑ "INTERNATIONAL STANDARDS ON COMBATING MONEY LAUNDERING AND THE FINANCING OF TERRORISM & PROLIFERATION. FATF Recommendations". FATF/OECD. p. 130. http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF_Recommendations.pdf. Retrieved 23 March 2015. 
  12. ↑ 12.0 12.1 [1]
  13. ↑ [2]
  14. ↑ Johnson, Jackie (2008). "Third round FATF mutual evaluations indicate declining compliance". Journal of Money Laundering Control 11, iss.1: 47–66. 
  15. ↑ 15.0 15.1 15.2 15.3 "International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation". October 2018. http://www.fatf-gafi.org/media/fatf/documents/brochuresannualreports/FATF%20annual%20report%202011%202012%20website.pdf. 
  16. ↑ "Methodology for Assessing Compliance with the FATF 40 Recommendations and the FATF 9 Special Recommendations". FATF-GAFI. http://www.fatf-gafi.org/media/fatf/documents/reports/methodology.pdf. Retrieved 25 June 2015. 
  17. ↑ "AML/CFT Evaluations and Assessments". FATF-GAFI. http://www.fatf-gafi.org/media/fatf/documents/reports/Handbook%20for%20assessors.pdf. Retrieved 25 June 2015. 
  18. ↑ Pakistan on FATF’s grey list: what, why, and why now?, Dawn (newspaper), 10 June 2019.
  19. ↑ Salierno, David (2003). "FATF revisits money laundering". The Internal Auditor; Altamonte Springs 60, iss. 4: 16–19. 
  20. ↑ Kenton, Will. "Financial Action Task Force (FATF)" (in en). https://www.investopedia.com/terms/f/financial-action-task-force-fatf.asp. 
  21. ↑ "Counter-Terrorism, "Policy Laundering," and the FATF: Legalizing Surveillance, Regulating Civil Society - IJNL Vol. 14 Iss. 1-2". http://www.icnl.org/research/journal/vol14iss1/feature.html. 
  22. ↑ "High-risk and non-cooperative jurisdictions". FATF-GAFI. http://www.fatf-gafi.org/topics/high-riskandnon-cooperativejurisdictions/. Retrieved 25 June 2015. 
  23. ↑ Stessens, Guy (2001). "The FATF 'Black List' of Non-Cooperative Countries or Territories". Leiden Journal of International Law 14 (1): 199–207. doi:10.1023/a:1017946510335. ISSN 0922-1565. 
  24. ↑ "FATF Members and Observers". http://www.fatf-gafi.org/about/membersandobservers/. 
  25. ↑ "FATF Members and Observers". FATF. https://www.fatf-gafi.org/about/membersandobservers/. Retrieved July 4, 2019. 
  26. ↑ "Welcoming the Kingdom of Saudi Arabia as a member to the FATF". FATF. http://www.fatf-gafi.org/publications/fatfgeneral/documents/outcomes-plenary-june-2019.html#Four. Retrieved June 21, 2019. 
  27. ↑ "What is FATF". https://www.anti-moneylaundering.org/fatf.aspx. 
  28. ↑ "Asia / Pacific Group On Money Laundering". Asia / Pacific Group. http://www.apgml.org/. Retrieved 23 March 2015. 
  29. ↑ "Caribbean Financial Action Task Force". Caribbean Financial Action Task Force (CFATF). https://www.cfatf-gafic.org/. Retrieved 23 March 2015. 
  30. ↑ "Eastern and Southern Africa Anti-Money Laundering Group-Home". Esaamlg.org. http://www.esaamlg.org/. Retrieved 2015-07-02. 
  31. ↑ "The Eurasian Group on Combating Money Laundering and Financing of Terrorism". Eurasiangroup.org. http://www.eurasiangroup.org/. Retrieved 2015-07-02. 
  32. ↑ "Moneyval". Coe.int. http://www.coe.int/t/dghl/monitoring/moneyval/. Retrieved 2015-07-02. 
  33. ↑ "GAFILAT". http://www.gafilat.org/?id=inicio&lang=en/. Retrieved 22 March 2015. 
  34. ↑ "GIABA - Welcome !". Giaba.org. http://www.giaba.org/. Retrieved 22 March 2015. 
  35. ↑ "MENAFATF Official Web Site". Menafatf.org. http://www.menafatf.org/. Retrieved 2015-07-02. 
  36. ↑ "Members and Observers of FATF". http://www.fatf-gafi.org/about/membersandobservers/. 
  37. ↑ 37.0 37.1 37.2 37.3 37.4 37.5 37.6 37.7 "Members and Observers - Financial Action Task Force (FATF)". http://www.fatf-gafi.org/about/membersandobservers/. 
  38. ↑ 38.0 38.1 barnabemusoni. "Counter-Terrorism Committee" (in en-US). https://www.un.org/sc/ctc/. 
  39. ↑ Choo, Kim-Kwang Raymond (2013). "New payment methods: A review of 2010–2012 FATF mutual evaluation reports". Computers & Security 36: 12–26. doi:10.1016/j.cose.2013.01.009. 
  40. ↑ Stessens, Guy (2001). "The FATF 'Black List' of Non-Cooperative Countries or Territories". Leiden Journal of International Law 14: 199–207. doi:10.1017/S0922156501000097. 
  41. ↑ "Counter-Terrorism, "Policy Laundering," and the FATF: Legalizing Surveillance, Regulating Civil Society". The International Journal of Not-for-Profit Law. http://www.icnl.org/research/journal/vol14iss1/feature.html. Retrieved 25 June 2015. 
  42. ↑ "The importance of urgent action to implement FATF's measures to counter terrorist financing and help defeat ISIL" (in en). https://www.fatf-gafi.org/publications/fatfgeneral/documents/importance-urgent-action-to-implement-fatf-standards-counter-terrorist-financing.html. 
  43. ↑ "Counter-Terrorist Financing and Humanitarian Security - World" (in en). https://reliefweb.int/report/world/counter-terrorist-financing-and-humanitarian-security. 

Further reading

  • Hawala, An Informal Payment System and Its Use to Finance Terrorism by Sebastian R. Müller, December 2006, VDM Verlag, ISBN:3-86550-656-9, ISBN:978-3-86550-656-6

External links




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