|Purpose||Combat money laundering and terrorism financing|
|Xiangmin Liu |
|Affiliations||Asia/Pacific Group on Money Laundering (APG),
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, its mandate was expanded to include terrorism financing.
The objectives of 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. FATF is a "policy-making body" that works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. FATF monitors progress in implementing its Recommendations through "peer reviews" ("mutual evaluations") of member countries.
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 in 2001 to include terrorist financing following the September 11 terror attacks.
Together, the Forty Recommendations on Money Laundering and eight (now nine) 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. 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.
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").
The FATF's Forty Recommendations on money laundering of 1990 are the primary policies issued by FATF  and the Nine Special Recommendations (SR) on Terrorism Financing (TF). 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. The FATF completely revised the Forty Recommendations in 1996 and 2003. 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. The 2003 Forty Recommendations require states, among other things, to:
The FATF has issued Special Recommendations on Terrorist Financing. In October 2001 the FATF issued the original eight Special Recommendations on Terrorism Financing, following the September 11 terrorist attacks in the United States. Among the measures, "Special Recommendation VIII" (SR VIII) specifically targeted 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. A ninth Special Recommendation was added later. In 2003 the Recommendations, as well as the 9 Special Recommendations were adjusted for the second time. The Recommendations, and Special Recommendations were advocated by over 180 countries.
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. The 2009 Handbook for Countries and Assessors outlines criteria for evaluating whether FATF standards are achieved in participating countries. 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.
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 take within their regulatory systems and their criminal justice systems as well the preventive measures that should be taken by specified businesses, professions, and institutions.
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). 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.
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.
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.
As of June 2019 there are 37 member countries of FATF. 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. Countries are subjected to evaluation by FATF to see that they are upholding laws and regulations enforced by FATF.
As of 2019FATF had 39 full members, comprising 37 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.
As of 2015:FATF had 8 associated FATF style regional members, that have similar objectives of setting up systems to fight terrorism and money corruption:
Members of the FATF regional bodies that are not full FATF members are entitled to attend FATF meetings as individual member-delegates of the regional bodies and to intervene on policy and operational issues.
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.
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.
The FATF follows strict criteria to identify potential threats.
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.
The FATF began to become a big figure shortly after the 9/11 attacks to help combat the financing of terrorist organizations. FATF makes sure funds are not easily accessible by terror organizations that are causing these 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 terrorist and corrupted organizations. 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. FATF criteria have mainly impacted NGOs that are located in Middle Eastern and terror-ridden countries. Some argue that the FATF Recommendations do not specifically set out restrictions for NGOs which often results in them going against FATF Recommendation.
FATF also has associated FATF style regional bodies, including:
GABAC (Central Africa)