FATF Recommendations

by Christine Duhaime, B.A., J.D., Financial Crime and Certified Anti-Money Laundering Specialist

FATF

In response to mounting concern over money laundering, the Financial Action Task Force (FATF) was established by the G7 in 1989 to develop and promote policies, both at the national and international level, to combat money laundering. It has 36 members covering the world’s major financial centers. It sets international AML/CTF standards and works for their universal adoption and implementation.

 The FATF works to protect the international financial system from abuse through three primary and interrelated lines of effort: first, standard setting; second, establishing a global network; and third, mutual evaluation and coordination of collective action.

In 1990, the FATF issued a report containing forty recommendations for addressing global money laundering concerns, which came to be known as the Forty Recommendations. In 2001, the development of standards to fight terrorist financing were added to the mandate of the FATF and it adopted eight new recommendations to address terrorist financing, known as the Eight Recommendations.

The continued evolution of money laundering techniques led the FATF to revise the standards comprehensively and in October 2004, the FATF published a Ninth Special Recommendation.

In 2012, the FATF revised the Recommendation significantly. They comprise the legal, supervisory, enforcement, and international cooperation criteria that taken together, form a comprehensive framework to combat money laundering and the financing of terrorism. The Recommendations specify the laws necessary to criminalize illicit finance; the authorities required for effective financial supervision and law enforcement; the customer identification, record keeping and reporting obligations for financial institutions to deter ilicil finance and ensure law enforcement has information they need to pursue financial crimes. The Recommendations also prescribe the essential elements of international cooperation to facilitate civil and criminal enforcement actions.

The FATF has sought to limit its membership expansion to strategically significant financial centers and has worked toward a global adoption and implementation of its standards through the development of a network of FATF-syle regional bodies (FSRBs). There are 8 FSRBs with a collective membership that encompasses 180 countries.  Through Mutual Evaluations and s0-called blacklists, the FATF ensures that its standards are endorsed worldwide. The next round of Mutual Evaluations will start in 2014 and will focus on compliance with the 2012 Recommendations.