The Financial Action Task Force, known as the FATF, has revised their Recommendations to step up the fight against money laundering and terrorist financing.
The objectives of the FATF are to set standards and to promote the effective implementation of legal, regulatory and operational measures in order to combat money laundering, terrorist financing and other related threats to the integrity of the international financial system.
The FATF are an inter-governmental body with 36 members and over 180 participating countries. It was established in 1989 by the G-7 Summit when held in Paris that year, in response to increasing concern over money laundering threats to the banking system and financial institutions. In 1990 they issued a report with 40 Recommendations which provided a comprehensive plan of actions required to fight against money laundering. In 2001, in the aftermath of the 9/11 attacks, 8 Special Recommendations were issued to deal with terrorist financing and in June 2004 a 9th Special Recommendation was issued to further strengthen the international standards for combating money laundering and terrorist financing.
In the latest revision of the Recommendations the FATF advise: "The revised FATF Recommendations now fully integrate counterterrorist financing measures with anti-money laundering controls, introduce new measures to counter the financing of the proliferation of weapons of mass destruction, and they will better address the laundering of the proceeds of corruption and tax crimes. They also strengthen the requirements for higher risk situations and allow countries to take a more targeted risk-based approach.
The cost of money laundering and underlying serious crime is very large, estimated between 2 and 5% of global GDP. The revision will enable national authorities to take more effective action against money laundering and terrorist financing at all levels - from the identification of bank customers opening an account through to investigation, prosecution and forfeiture of assets. At the global level, the FATF will also monitor and take action to promote implementation of the standards."
The main changes are:
- Combating the financing of the proliferation of weapons of mass destruction through the consistent implementation of targeted financial sanctions when these are called for by the UN Security Council.
- Improved transparency to make it harder for criminals and terrorists to conceal their identities or hide their assets behind legal persons and arrangements.
- Stronger requirements when dealing with politically exposed persons (PEPs).
- Expanding the scope of money laundering predicate offences by including tax crimes.
- An enhanced risk-based approach which enables countries and the private sector to apply their resources more efficiently by focusing on higher risk areas.
- More effective international cooperation including exchange of information between relevant authorities, conduct of joint investigations, and tracing, freezing and confiscation of illegal assets.
- Better operational tools and a wider range of techniques and powers, both for the financial intelligence units, and for law enforcement to investigate and prosecute money laundering and terrorist financing.
The European Commission is one of the founding members of the FATF and the current EU legislation (the Third Anti-Money Laundering Directive) provides a European framework based around the FATF Recommendations. Following the revision by the FATF the Directive has been reviewed to reflect these changes and proposals for a Fourth Anti-Money Laundering Directive Incorporating these changes has recently been made.
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