Compliance Standards for AML and Combating Financing of Terrorism

FATF was launched in 1989 by the G7, and is based at the OECD (Organization for Economic Cooperation and Development) in Paris.

There are 38 members, comprised of 36 jurisdictions, and 2 regions (GCC, Gulf Cooperation Council, and EU). There are 29 regional and international organizations that are associate members or observers, and participate in the work of the FATF.

Members:

Argentina, Australia, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France,

Germany, Greece, Hong Kong (China), Iceland, India, Ireland, Italy, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Portugal, the Russian Federation, Singapore, South

Africa, South Korea, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.


Although the GCC is a member, the individual member countries of the GCC are not members, this is Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.


To be a member, the jurisdiction must be strategically important (by GDP, size of banking sector, or impact to the global financial system), and lead to a more balanced geographic spread of members.


It also should provide political commitment to the 40 recommendations, and AML/CFT, agree to implement all 40 recommendations within 3 years, be assessed for compliance periodically, and actively participate in FATF. The country should also be a member of the regional FATF member.


The compliance criteria must be met in relation to:

  • Money laundering and terrorist financing offenses

  • Freezing and confiscation

  • Customer due diligence (although there is some flexibility in this requirement)

  • Record-keeping

  • Suspicious transaction reporting

  • Financial sector supervision

  • International cooperation


Objectives of FATF:

  • Promote AML messages worldwide

  • Monitor implementation of recommendations by members (annual self assessment, plus periodic visit from another member)

  • Monitoring money laundering trends/countermeasures (the ‘typologies’ exercise)

  • FATF cannot impose fines or other penalties, if members do not comply it applies a graduated approach of enhanced peer pressure, including putting the jurisdiction on a watch list, and ultimately rejecting the member.




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