What is the Financial Action Task Force?
The Financial Action Task Force (FATF) is the global inter-governmental body that sets international standards for combating money laundering, terrorist financing, and the financing of proliferation of weapons of mass destruction. Established in 1989 by the G7, the FATF's 40 Recommendations form the basis for AML/CFT legislation in virtually every jurisdiction worldwide.
The 40 recommendations
The FATF Recommendations cover the full spectrum of AML/CFT obligations:
AML/CFT policies and coordination
National risk assessments, designation of competent authorities, and inter-agency coordination mechanisms.
Preventive measures
Customer due diligence, record-keeping, suspicious transaction reporting, and the application of the risk-based approach to all obliged entities including DNFBPs.
Transparency and beneficial ownership
Requirements for beneficial ownership transparency of legal persons and arrangements.
International cooperation
Mutual legal assistance, extradition, and the exchange of information between Financial Intelligence Units.
Mutual evaluations
The FATF conducts periodic assessments of member countries' compliance with its Recommendations through the mutual evaluation process. Countries assessed as having significant deficiencies may be placed on the FATF's grey list (increased monitoring) or black list (high-risk jurisdictions subject to countermeasures). These designations have direct implications for EDD requirements.
Impact on non-financial institutions
FATF Recommendations 22 and 23 specifically address DNFBP obligations, requiring them to apply CDD, record-keeping, and reporting obligations. The FATF has published sector-specific guidance for real estate and legal professionals, among others.
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