FATF 40+9 Recommedations- A bird' eye view

 Financial Action Task Force (FATF) is an inter-governmental body, responsible for setting global standards on anti-money laundering (AML) and combating the financing of terrorism (CFT).

The FATF Recommendations set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction. Countries have diverse legal, administrative and operational frameworks and different financial systems, and so cannot all take identical measures to counter these threats.

The FATF Recommendations, therefore, set an international standard, which countries should implement through measures adapted to their particular circumstances. The FATF Standards comprise the Recommendations themselves and their Interpretive Notes, together with the applicable definitions in the Glossary.   

The measures set out in the FATF Standards should be implemented by all members of the FATF and the FSRBs (FATF-Style Regional Bodies), and their implementation is assessed rigorously through Mutual Evaluation processes, and through the assessment processes of the International Monetary Fund and the World Bank – on the basis of the FATF’s common assessment methodology.

The 2012 FATF standards contain certain core, or essential, Recommendations including the requirement to:

a)       Criminalise money laundering, terrorist financing and proliferation financing in accordance with international law;

b)       Freeze terrorist assets and confiscate the proceeds of crime;

c)       Establish a financial intelligence unit to collect, analyse, evaluate and disseminate suspicious transaction reports from financial institutions and other reporting entities;

d)       Supervise those financial institutions and other reporting entities to ensure compliance with customer due diligence and other requirements contained in the standards; and

e)       Ensure that comprehensive and effective mechanisms are in place to cooperate effectively on the international level given the growing international dimension to these crimes.

The key changes to the FATF standards included in the 2012 revised version are as follows:

·         Requirement for countries to undertake a national risk assessment;

·         Measures relating to proliferation financing;

·         Addition of tax crimes as predicate offences to money laundering;

·         Measures relating to domestic politically exposed persons;

·         Requirement for countries to ratify the UN Convention Against Corruption.

 

The FATF also issued a number of guidance and best practices papers regarding the implementation of its Recommendations. These are thematically oriented and focus either on the implementation of particular recommendations or other cross-cutting issues. Reference to these documents is made under the relevant topics of the “Implementation” section.

 

FATF Recommendations 2012 in a nutshell—

A – AML/CFT POLICIES AND COORDINATION

1 – Assessing risks & applying a risk-based approach

2 – National cooperation and coordination

B – MONEY LAUNDERING AND CONFISCATION

3 – Money laundering offence

4 – Confiscation and provisional measures

C – TERRORIST FINANCING AND FINANCING OF PROLIFERATION

5 – SRII Terrorist financing offence

6 – SRIII Targeted financial sanctions related to terrorism & terrorist financing

7 – Targeted financial sanctions related to proliferation

8 – Non-profit organisations

D – PREVENTIVE MEASURES

          9 – Financial institution secrecy laws

      Customer due diligence and record keeping

       10 – Customer due diligence

       11 – Record keeping Additional measures for specific customers and activities

       12 – Politically exposed persons

       13 – Correspondent banking

       14 – Money or value transfer services

       15 – New technologies

       16 – Wire transfers Reliance, Controls and Financial Groups

       17 – Reliance on third parties

      18 – Internal controls and foreign branches and subsidiaries

      19 – Higher-risk countries

  Reporting of suspicious transactions

     20 – Reporting of suspicious transactions

     21 – Tipping-off and confidentiality Designated non-financial Businesses and Professions (DNFBPs)

     22 – DNFBPs: Customer due diligence

     23 – DNFBPs: Other measures

E – TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS

     24 – Transparency and beneficial ownership of legal persons

     25 – Transparency and beneficial ownership of legal arrangements

F – POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURES

   Regulation and Supervision

    26 – Regulation and supervision of financial institutions

    27 – Powers of supervisors

    28 – Regulation and supervision of DNFBPs Operational and Law Enforcement

    29 – Financial intelligence units

    30 – Responsibilities of law enforcement and investigative authorities

    31 – Powers of law enforcement and investigative authorities

    32 – Cash couriers General Requirements

    33 – Statistics

    34 – Guidance and feedback Sanctions

    35 – Sanctions

 G – INTERNATIONAL COOPERATION

  36 – International instruments

  37 – Mutual legal assistance

 38 – Mutual legal assistance: freezing and confiscation

 39 – Extradition

40 – Other forms of international cooperation

As of October 2023, the Financial Action Task Force (FATF) has 38 full member countries. The FATF also has 2 regional organizations, the Gulf Cooperation Council and the European Commission, and 9 associate members who enforce the FATF's mandate on a regional basis. In total, more than 200 countries and jurisdictions have committed to implement the FATF's standards. India became member of the FATF in June 2010.

Happy Reading,

Those who read this, also read:

1. Anti-Money Laundering: Definitions, Origins

2. AML/CFT International Cooperation: Egmont group

3. AML/CFT Internatioanl Cooperation: APG Group

4. Risk Based Approach in Customer Due Diligence(CDD)-FATF