The interconnected flow of funds across international bank accounts, corporate entities, and diverse accessible platforms has given rise to a range of concerns about illicit financial activities, such as financial crimes, money laundering, terrorist financing, and tax evasion. These challenges are a direct consequence of the extensive reach and concurrent imposition of tax responsibilities in the global financial landscape.
- Shaping your secure financial future today: what FATF is all about in laypeople’s terms
- Shaping your secure financial future today: FATF activities and structure
- Inside look: FATF member list
- Inside look: FATF associated members and observers
- Shaping your secure financial future today: FATF recommendations
When it comes to tax matters, the OECD takes the lead, while the Financial Action Task Force (FATF) focuses on combating illicit financial activities. These organizations each maintain their own lists of non-compliant countries that fail to meet the requirements, which affects their standing in the global market and level of trust.
Banks and financial institutions play a vital role in FATF’s comprehensive evaluation process. They act as critical intermediaries responsible for the transfer, receipt, and protection of funds. Since FATF’s recommendations primarily pertain to financial affairs, banks diligently monitor updates from the organization and strive to adhere to all the recommendations to uphold their reputation as secure and reliable entities.
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Shaping your secure financial future today: what FATF is all about in laypeople’s terms
Formed in France in 1989 through the collaboration of G7 nations, the Financial Action Task Force on Money Laundering (FATF) operates as an international entity with a pivotal aim of addressing financial crimes, including money laundering and the funding of terrorism. To effectively guide its initiatives, FATF has established a comprehensive set of 40 Recommendations that member countries regularly review and update to remain adaptable in the face of evolving global dynamics.
The acronym FATF stands for Financial Action Task Force, reflecting the organization’s mission to develop measures and standards to combat money laundering and terrorist financing.
Put simply, FATF focuses on addressing offshore activities and illegal schemes employed by international companies and wealthy individuals to conceal their assets. However, FATF’s main goal extends beyond detection. It aims to create an environment where money laundering becomes impossible and information about beneficiaries is transparent.
Not all countries fully adhere to FATF’s recommendations, resulting in the creation of black and gray lists that highlight countries with inadequate measures to combat financial crimes. To access the updated list of countries included in the black list for 2023, visit FATF’s official portal: http://www.fatf-gafi.org.
Shaping your secure financial future today: FATF activities and structure
T. Rajakumar from Singapore serves as the President of FATF, holding office from July 1, 2022, to June 30, 2024. The FATF Secretariat is situated at the OECD headquarters in Paris but operates independently from the OECD and other international organizations.
The main objective of FATF is to develop effective strategies to combat terrorism, financial crimes, and money laundering. Decisions are made during plenary meetings, which occur at least 3 times per year.
FATF conducts its work through several working groups that focus on the following areas:
- Assessment and Implementation
- Combating the Financing of Terrorist Organizations
- International Cooperation Research.
Each member country of FATF maintains its internal units, such as Financial Intelligence Units (FIUs) and Regional Bodies. These units gather information within their respective countries to detect illegal money transfer schemes, offshore activities, and other channels associated with money laundering and terrorism financing.
FYI: UN Security Council Resolutions 1617 (2005) and 2462 (2019) call on UN member states to implement the FATF Recommendations.
Inside look: FATF member list
In 2023, FATF includes the following countries as its members:
- Hong Kong
- New Zealand
- Saudi Arabia
- South Africa
- United Kingdom
- United States.
Indonesia is currently an observer state within FATF.
Inside look: FATF associated members and observers
FATF collaborates with numerous international organizations that implement regional initiatives targeting financial crimes based on the recommendations of the Group. These organizations also evaluate national systems to ensure compliance with international standards for combating money laundering.
For your convenience, FATF regional groups (its associated members) as of 2023 are listed below:
- Asia-Pacific Group on Money Laundering (APG)
- Caribbean Financial Action Task Force (CFATF)
- Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL)
- Eurasian Group (EAG)
- Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)
- Financial Action Task Force of Latin America (GAFILAT)
- Intergovernmental Action Group against Money Laundering in West Africa (GIABA)
- Middle East and North Africa Financial Action Task Force (MENAFATF)
- Task Force on Anti-Money Laundering in Central Africa (GABAC).
FATF has welcomed the participation of several well-known international organizations as FATF observers:
- African Development Bank
- Basel Committee on Banking Supervision (BCBS)
- Council of Europe
- European Central Bank
- International Monetary Fund (IMF)
- Organization for Economic Co-operation and Development (OECD)
- Organization for Security and Co-operation in Europe (OSCE)
- World Bank.
All of these organizations are involved in the development and implementation of programs aimed at combating money laundering and criminal financing. They work closely with FATF and adhere to the organization’s recommendations when establishing their own regulatory frameworks.
The FATF standards for preventing money laundering are closely connected to the banking systems of all countries. This has resulted in the implementation of new regulations concerning the disclosure of beneficiary information and the verification of clients seeking to open foreign accounts.
Shaping your secure financial future today: FATF recommendations
FATF has formulated a comprehensive set of 40 Recommendations, comprising international measures aimed at establishing effective systems in every country to combat financial crimes and terrorist financing. These Recommendations address various crucial aspects:
- establishment of national and international frameworks and legislation to counteract money laundering and terrorist financing
- alignment with international conventions, UN resolutions, and acts developed by international organizations in the realm of AML/CFT
- implementation of the FATF Recommendations within the legal frameworks of individual countries.
FATF Recommendations work well with existing global rules, without duplicating or conflicting them.
The initial set of FATF Recommendations was issued in 1990 to address the need for regulations safeguarding the financial system from money laundering associated with drug trafficking. Subsequently, in 1996, these standards were revised to tackle emerging issues related to tech-based financial manipulations.
In October 2001, FATF expanded its mandate to include 8 initial and later 9 special Recommendations specifically focusing on combating the financing of terrorism. In 2003, the established standards underwent another revision and received recognition from 180 countries.
In 2012, FATF collaborated with FATF-style Regional Bodies (FSRBs) and observer organizations such as the International Monetary Fund, World Bank, and United Nations to update the Recommendations, ensuring their alignment with the current global landscape. These Recommendations now serve as the international benchmark for combating money laundering and financing terrorist groups.
For more information regarding global structures, regulatory bodies, and the latest updates on tax policies or immigration programs, please visit the International Wealth portal.