FATF Recommendations on Combating Money Laundering and the Financing of Terrorism & Proliferation
The FATF Recommendations, including their Interpretative Notes, set out the global standards for implementing an effective system for combating money laundering and the financing of terrorism and proliferation, and provide a basic framework to detect, prevent and suppress these crimes. The FATF Standards are supplemented by non-binding Guidance and Best Practices papers. The FATF Recommendations cover:
- Identification of the risks, and the development of policies and domestic co-ordination.
- Legal systems, including the criminalisation of money-laundering and of terrorist financing, the adoption and implementation of UN conventions, and powers to confiscate criminal assets and targeted financial sanctions to combat terrorism, terrorist financing and the financing of proliferation.
- Preventative measures to be taken by financial institutions and designated non-financial professions and businesses, including customer due diligence, record-keeping, reporting of suspicious transactions, and the regulation and supervision of these activities.
- Institutional measures, including the establishment of a Financial Intelligence Unit; and the existence and powers of competent authorities responsible for investigating money laundering and terrorist financing.
- Transparency measures including the identification of the beneficial owners of legal persons and arrangements.
- International cooperation, including the provision of mutual legal assistance, and other forms of cooperation between authorities.
FATF issued the assessment methodology in February 2013. Members' compliance with the standards is assessed at approximately seven-year intervals through a peer-review process. A team of experts prepare a detailed Mutual Evaluation Report on the basis of laws, regulations and other material, questionnaire responses, and a two-week on-site assessment in which all relevant governmental and private sector bodies are interviewed. Reports are discussed and adopted by the entire membership, and jurisdictions' level of compliance with each recommendation is assessed, rated and deficiencies identified. Jurisdictions failing to achieve a sufficient level of compliance are subject to a follow-up process which regularly monitors progress in addressing deficiencies; and may be subject to a graduated set of measures designed to encourage countries to enhance their systems. Similar assessments are conducted by the FATF-style regional bodies, the IMF and World Bank.