Financial Action Task Force Overview And Approach To CDD And KYC: Helpful Recommendations

FATF is the most powerful and influential international organization. FATF is an intergovernmental organization whose mission is to set international standards and develop and promote policies to combat money laundering and terrorism funding at both the national and international levels. This article elaborates on ‘Financial Action Task Force Overview And Approach To CDD And KYC’.

FATF’s goals are to establish worldwide standards and support the successful implementation of legal, regulatory, and operational measures to combat money laundering, terrorist funding, and other risks to the international financial system’s integrity.

Financial Action Task Force Overview And Approach To Cdd And Kyc

The FATF Mission

FATF’s goals are to establish worldwide standards and support the successful implementation of legal, regulatory, and operational measures to combat money laundering, terrorist funding, and other risks to the international financial system’s integrity. 

The FATF Recommendations

In February 2012, a new set of 40 Recommendations was released after consultation with governments and the financial sector. The previous nine Special Recommendations have been merged into the new 40 Recommendations, which are intended to reinforce global safeguards and maintain the financial system’s integrity by giving nations more instruments to combat financial crime. Simultaneously, they address new priority areas, including corruption, international transparency, proliferation finance, and tax evasion. 

The principles in the 40 Recommendations are unique in that they apply to all key stakeholders engaged in combating money laundering, including regulators, law enforcement agencies, regulated firms, and lawmakers. 

The FATF 40 Recommendations do not have the force of law. Their application is not mandatory, even for their principal members. The 40 Recommendations must be transposed into national or regional law before they have any effect. Nevertheless, as an essential criterion for membership, each FATF member country undertakes to endorse and implement the Recommendations and then submit to a mutual evaluation by other members to assess the effectiveness of their implementation.

Financial Action Task Force Overview And Approach To CDD And KYC

Other countries and jurisdictions have a powerful incentive to implement the FATF Recommendations and be assessed against them. It provides global confirmation that they have the necessary AML/CFT strategies and standards to protect their financial systems and other businesses from abuse by criminals. Countries and jurisdictions that are seen not to have such measures in place find it increasingly difficult to undertake financial business with those countries that have put the necessary measures in place. 

The international AML/CFT standards comprise the 40 Recommendations together with the detailed “Interpretive Notes .” Although the Recommendations remain static for several years at a time, FATF publishes a regularly updated range of best practice guidance on specific issues, which builds on the Recommendations. Another of FATF’s important activities is studying money laundering and terrorist financing methods and trends. FATF examines current typologies continuously to ensure that its AML/CFT policy making is relevant and appropriate for responding to evolving threats. 

FATF Overview

The FATF is the global standard-setter for fighting money laundering and terrorist financing. In 2003, the FATF became the first international body to set global standards on beneficial ownership. It required countries to ensure that their authorities could obtain up-to-date and accurate information about the person(s) behind companies’ foundations and other legal persons. The FATF further strengthened and clarified its beneficial ownership requirements in 2012.

The FATF has finalized best practices with examples from across the global network of FATF and FATF-Style regional bodies’ members, which will help countries implement the FATF’s requirements. The report highlights that jurisdictions using a multi-pronged approach with several sources of information are often more effective in preventing the misuse of legal persons for criminal purposes.

Jurisdictions

There are currently 39 members of FATF: 37 jurisdictions and 2 regional organizations (the Gulf Cooperation Council and the European Commission). These 39 members (see table below) are at the core of global efforts to combat money laundering and terrorist financing. The below list is correct as of September 2020.

Final Thoughts

This article elaborates on ‘Financial Action Task Force (FATF): Background Overview and Approach to CDD/KYC‘. FATF is a very popular and influential organization whose main goal is to set international standards and develop policies to help prevent and combat money laundering

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