The Financial Action Task Force (FATF), also known by its
French name, Groupe d'action financière (GAFI), is an
intergovernmental organisation
An international organization, also known as an intergovernmental organization or an international institution, is an organization that is established by a treaty or other type of instrument governed by international law and possesses its own leg ...
founded in 1989 on the initiative of the
G7 to develop policies to combat
money laundering
Money laundering is the process of illegally concealing the origin of money obtained from illicit activities (often known as dirty money) such as drug trafficking, sex work, terrorism, corruption, and embezzlement, and converting the funds i ...
and to maintain certain interest. In 2001, its mandate was expanded to include
terrorism financing
Terrorism financing is the provision of funds or providing financial support to individual terrorists or non-state actors.
Most countries have implemented measures to counter terrorism financing (CTF) often as part of their money laundering law ...
. The FATF Secretariat is administratively hosted at the
OECD
The Organisation for Economic Co-operation and Development (OECD; , OCDE) is an international organization, intergovernmental organization with 38 member countries, founded in 1961 to stimulate economic progress and international trade, wor ...
in Paris, but the two organisations are separate.
The objectives of FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering,
terrorist financing
Terrorism financing is the provision of funds or providing financial support to individual terrorists or non-state actors.
Most countries have implemented measures to counter terrorism financing (CTF) often as part of their money laundering law ...
and other related threats to the integrity of the international financial system. FATF is a "policy-making body" that works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. FATF monitors progress in implementing its Recommendations through "peer reviews" ("mutual evaluations") of member countries.
Since 2000, FATF has maintained the
FATF blacklist (formally called the "Call for action") and the
FATF greylist (formally called the "Other monitored jurisdictions").
[FATF nations, Full member nations, Observer nations, Call for action nations (Blacklisted nations), Other monitored jurisdictions (greylisted nations)]
FATF, accessed 24 October 2019. The blacklist has led financial institutions to shift resources and services away from the listed.
This in turn has motivated domestic economic and political actors in the listed countries to pressure their governments to introduce regulations compliant with the FATF.
History
FATF was formed at the 1989
G7 Summit in Paris to combat the growing problem of money laundering. The task force was charged with studying money laundering trends, monitoring legislative, financial and law enforcement activities taken at the national and international level, reporting on compliance, and issuing recommendations and standards to combat
money laundering
Money laundering is the process of illegally concealing the origin of money obtained from illicit activities (often known as dirty money) such as drug trafficking, sex work, terrorism, corruption, and embezzlement, and converting the funds i ...
. At the time of its formation, FATF had 16 members, which by 2023 had grown to 40. In its first year, FATF issued a report containing forty recommendations to more effectively fight money laundering. These standards were revised in 2003 to reflect evolving patterns and techniques in money laundering.
The mandate of the organisation was expanded in 2001 to include terrorist financing following the
September 11 terror attacks
September is the ninth month of the year in the Julian and Gregorian calendars. Its length is 30 days.
September in the Northern Hemisphere and March in the Southern Hemisphere are seasonally equivalent.
In the Northern hemisphere, the beg ...
.
FATF Recommendations
Creation and ongoing maintenance
Together, the Forty Recommendations on Money Laundering and eight (now nine) Special Recommendations on Terrorism Financing set the international standard for anti-money laundering measures and combating the financing of terrorism and
terrorist acts. They set out the principles for action and allow countries a measure of flexibility in implementing these principles according to their particular circumstances and constitutional frameworks. Both sets of FATF Recommendations are intended to be implemented at the national level through legislation and other legally binding measures.
There are multiple groups to organise the Recommendations;
AML/CFT Policies and Coordination, Money Laundering and Confiscation, Terrorist Financing and Financial Proliferation, Preventive Measures, Transparency and Beneficial Ownership of Legal Persons and Arrangements, Powers and Responsibilities of Competent Authorities and other Institutional Measures, and International Cooperation.
In February 2012, the FATF codified its recommendations and Interpretive Notes into one document that maintains SR VIII (renamed Recommendation 8), and also includes new rules on weapons of mass destruction, corruption and wire transfers (Recommendation 16, commonly known as the “travel rule”).
In October 2018, the FATF updated Recommendation No. 15, expanding its reach to include operations related to virtual assets. It urged its member countries to ensure that providers of virtual asset services are regulated for AML/CFT objectives and licensed or registered. Additionally, they should be under robust systems for supervision assurance and compliant with the FATF recommendations.
In June 2019, the FATF released its first guidance on the risk-based approach for virtual assets and virtual asset service providers. This guidance offers recommendations on how member jurisdictions should regulate cryptocurrency businesses, placing anti-money laundering and countering the financing of terrorism (AML/CFT) obligations on VAs and VASPs. It also extended Recommendation 16 to VASPs.
This guidance was updated on March 19 and October 2021.
Forty recommendations on money laundering
The FATF's Forty Recommendations on Money Laundering of 1990 are the primary policies issued by FATF
and the Nine Special Recommendations (SR) on Terrorism Financing (TF). The Recommendations are seen globally as the world standard in anti-money laundering as well many countries have committed to putting the Forty Recommendations in place. The Recommendations cover the criminal justice system and law enforcement, international cooperation, and the financial system and its regulation. The FATF completely revised the Forty Recommendations in 1996 and 2003.
By 1996 the Recommendations had to be updated to include more than just drug-money laundering, as well as to keep up with changing techniques.
The 2003 Forty Recommendations require states, among other things, to:
*Implement relevant international conventions
*Criminalise money laundering and enable authorities to confiscate the proceeds of money laundering
*Implement customer due diligence (e.g., identity verification), record keeping and suspicious transaction reporting requirements for financial institutions and designated non-financial businesses and professions
*Establish a
financial intelligence unit to receive and disseminate suspicious transaction reports, and
*Cooperate internationally in investigating and prosecuting money laundering
Nine Special Recommendations on Terrorism Financing
The FATF has issued Special Recommendations on Terrorist Financing. In October 2001 the FATF issued the original eight Special Recommendations on Terrorism Financing, following the
September 11 attacks
The September 11 attacks, also known as 9/11, were four coordinated Islamist terrorist suicide attacks by al-Qaeda against the United States in 2001. Nineteen terrorists hijacked four commercial airliners, crashing the first two into ...
in the United States. Among the measures, Special Recommendation VIII (SR VIII) specifically targeted non-profit organisations. This was followed by the International Best Practices Combating the Abuse of Non-Profit Organisations in 2002, released one month before the U.S. Department of Treasury's Anti-Terrorist Financing Guidelines, and the Interpretive Note for SR VIII in 2006. A ninth Special Recommendation was added later.
In 2003 the Recommendations, as well as the 9 Special Recommendations were adjusted for the second time.
Compliance mechanism
In February 2004 (Updated as of February 2009) the FATF published a reference document Methodology for Assessing Compliance with the FATF 40 Recommendations and the FATF 9 Special Recommendations.
The 2009 Handbook for Countries and Assessors outlines criteria for evaluating whether FATF standards are achieved in participating countries.
FATF evaluates a country's performance based on its assessment methodology that covers: 1. technical compliance, which is about the legal and institutional framework and the powers and procedures of the competent authorities, and 2. effectiveness assessment, which is about the extent to which the legal and institutional framework is producing the expected results.
[Pakistan on FATF’s grey list: what, why, and why now?]
Dawn (newspaper)
''Dawn'' is a Pakistani English language, English-language newspaper that was launched in British Raj, British India by Muhammad Ali Jinnah in 1941. It is the largest English newspaper in Pakistan, and is widely considered the country's newspap ...
, 10 June 2019.
There are many differences between countries dealing with their legal and
financial system
A financial system is a system that allows the exchange of funds between financial market participants such as lenders, investors, and borrowers. Financial systems operate at national and global levels. Financial institutions consist of comple ...
, which is taken into consideration by the FATF. There is a set minimum of actions that meet a standard, that all countries can use regarding their own situation. This standard covers all actions that a nation should take within its regulatory systems and its criminal justice systems as well as the preventive measures that should be taken by specified businesses, professions, and institutions.
For
non-profit organisations (NPOs) there has been a command for more financial transparency, to make sure that they do not become easier for terrorist organisations to launder money through the organisations. This hypothesis was thought of by intergovernmental organisations. These intergovernmental organisations include the
World Bank
The World Bank is an international financial institution that provides loans and Grant (money), grants to the governments of Least developed countries, low- and Developing country, middle-income countries for the purposes of economic development ...
, the
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development (OECD; , OCDE) is an international organization, intergovernmental organization with 38 member countries, founded in 1961 to stimulate economic progress and international trade, wor ...
and the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of las ...
. NPOs are put under surveillance, especially when they are associated with "suspect communities" or if they are based or working in zones of conflict.
FATF data is a key indicator of the quality of AML/CFT systems in the
Basel AML Index, a money laundering and terrorist financing risk assessment tool developed by the
Basel Institute on Governance.
There are still compliance issues in areas that might afford exploitative opportunities for
transnational crime and terrorist networks. This can have detrimental effects on a country's national security through increasing risks of money laundering and financing of terrorism as well as wastage due to the implementation of inappropriate regulatory measures. The objective is to increase mitigation strategies that would enable scarce resources in fighting money laundering and terrorism financing threats.
The FATF follows strict criteria to identify potential threats.
Black or greylisting of non-compliant nations
In addition to FATF's "Forty plus Nine" Recommendations, in 2000 FATF issued a list of "
Non-Cooperative Countries or Territories" (NCCTs), commonly called the
FATF Blacklist. This was a list of 15 jurisdictions that, for one reason or another, FATF members believed were uncooperative with other jurisdictions in international efforts against money laundering (and, later, terrorism financing). Typically, this lack of cooperation manifested itself as an unwillingness or inability (frequently, a legal inability) to provide foreign law enforcement officials with information relating to bank account and brokerage records, and customer identification and
beneficial owner information relating to such bank and brokerage accounts,
shell corporation
A shell corporation is a company or corporation with no significant assets or operations often formed to obtain financing before beginning business. Shell companies were primarily vehicles for lawfully hiding the identity of their beneficial ...
s, and other financial vehicles commonly used in money laundering. All remaining Non-Cooperative Countries and Territories in the NCCT initiative were delisted in October 2006, however, FATF continues to maintain a "blacklist" of "High Risk" jurisdictions and a "greylist" of "Jurisdictions Under Increased Monitoring", and issues updates as countries on High-risk and non-cooperative jurisdictions list have made significant improvements in standards and cooperation. The FATF also issues updates to identify additional jurisdictions that pose Money Laundering/Terrorist Financing risks.
The FATF surveyed 26 jurisdictions to check their ability and willingness to cooperate with other countries in the international fight against money laundering. The review contained the summaries of these surveys. Fifteen jurisdictions were branded "non-cooperative countries or territories", because of the high number of harmful practices identified in these jurisdictions.
, countries in the blacklist are
Iran
Iran, officially the Islamic Republic of Iran (IRI) and also known as Persia, is a country in West Asia. It borders Iraq to the west, Turkey, Azerbaijan, and Armenia to the northwest, the Caspian Sea to the north, Turkmenistan to the nort ...
,
Myanmar
Myanmar, officially the Republic of the Union of Myanmar; and also referred to as Burma (the official English name until 1989), is a country in northwest Southeast Asia. It is the largest country by area in Mainland Southeast Asia and has ...
and
North Korea
North Korea, officially the Democratic People's Republic of Korea (DPRK), is a country in East Asia. It constitutes the northern half of the Korea, Korean Peninsula and borders China and Russia to the north at the Yalu River, Yalu (Amnok) an ...
. Countries and territories in the grey list are
Algeria
Algeria, officially the People's Democratic Republic of Algeria, is a country in the Maghreb region of North Africa. It is bordered to Algeria–Tunisia border, the northeast by Tunisia; to Algeria–Libya border, the east by Libya; to Alger ...
,
Angola
Angola, officially the Republic of Angola, is a country on the west-Central Africa, central coast of Southern Africa. It is the second-largest Portuguese-speaking world, Portuguese-speaking (Lusophone) country in both total area and List of c ...
,
Bulgaria
Bulgaria, officially the Republic of Bulgaria, is a country in Southeast Europe. It is situated on the eastern portion of the Balkans directly south of the Danube river and west of the Black Sea. Bulgaria is bordered by Greece and Turkey t ...
,
Burkina Faso
Burkina Faso is a landlocked country in West Africa, bordered by Mali to the northwest, Niger to the northeast, Benin to the southeast, Togo and Ghana to the south, and Ivory Coast to the southwest. It covers an area of 274,223 km2 (105,87 ...
,
Cameroon
Cameroon, officially the Republic of Cameroon, is a country in Central Africa. It shares boundaries with Nigeria to the west and north, Chad to the northeast, the Central African Republic to the east, and Equatorial Guinea, Gabon, and the R ...
,
Côte d'Ivoire
Ivory Coast, also known as Côte d'Ivoire and officially the Republic of Côte d'Ivoire, is a country on the southern coast of West Africa. Its capital city of Yamoussoukro is located in the centre of the country, while its largest city and ...
,
Croatia
Croatia, officially the Republic of Croatia, is a country in Central Europe, Central and Southeast Europe, on the coast of the Adriatic Sea. It borders Slovenia to the northwest, Hungary to the northeast, Serbia to the east, Bosnia and Herze ...
,
Democratic Republic of the Congo
The Democratic Republic of the Congo (DRC), also known as the DR Congo, Congo-Kinshasa, or simply the Congo (the last ambiguously also referring to the neighbouring Republic of the Congo), is a country in Central Africa. By land area, it is t ...
,
Haiti
Haiti, officially the Republic of Haiti, is a country on the island of Hispaniola in the Caribbean Sea, east of Cuba and Jamaica, and south of the Bahamas. It occupies the western three-eighths of the island, which it shares with the Dominican ...
,
Kenya
Kenya, officially the Republic of Kenya, is a country located in East Africa. With an estimated population of more than 52.4 million as of mid-2024, Kenya is the 27th-most-populous country in the world and the 7th most populous in Africa. ...
,
Laos
Laos, officially the Lao People's Democratic Republic (LPDR), is the only landlocked country in Southeast Asia. It is bordered by Myanmar and China to the northwest, Vietnam to the east, Cambodia to the southeast, and Thailand to the west and ...
,
Lebanon
Lebanon, officially the Republic of Lebanon, is a country in the Levant region of West Asia. Situated at the crossroads of the Mediterranean Basin and the Arabian Peninsula, it is bordered by Syria to the north and east, Israel to the south ...
,
Mali
Mali, officially the Republic of Mali, is a landlocked country in West Africa. It is the List of African countries by area, eighth-largest country in Africa, with an area of over . The country is bordered to the north by Algeria, to the east b ...
,
Monaco
Monaco, officially the Principality of Monaco, is a Sovereign state, sovereign city-state and European microstates, microstate on the French Riviera a few kilometres west of the Regions of Italy, Italian region of Liguria, in Western Europe, ...
,
Mozambique
Mozambique, officially the Republic of Mozambique, is a country located in Southeast Africa bordered by the Indian Ocean to the east, Tanzania to the north, Malawi and Zambia to the northwest, Zimbabwe to the west, and Eswatini and South Afr ...
,
Namibia
Namibia, officially the Republic of Namibia, is a country on the west coast of Southern Africa. Its borders include the Atlantic Ocean to the west, Angola and Zambia to the north, Botswana to the east and South Africa to the south; in the no ...
,
Nepal
Nepal, officially the Federal Democratic Republic of Nepal, is a landlocked country in South Asia. It is mainly situated in the Himalayas, but also includes parts of the Indo-Gangetic Plain. It borders the Tibet Autonomous Region of China Ch ...
,
Nigeria
Nigeria, officially the Federal Republic of Nigeria, is a country in West Africa. It is situated between the Sahel to the north and the Gulf of Guinea in the Atlantic Ocean to the south. It covers an area of . With Demographics of Nigeria, ...
,
South Africa
South Africa, officially the Republic of South Africa (RSA), is the Southern Africa, southernmost country in Africa. Its Provinces of South Africa, nine provinces are bounded to the south by of coastline that stretches along the Atlantic O ...
,
South Sudan
South Sudan (), officially the Republic of South Sudan, is a landlocked country in East Africa. It is bordered on the north by Sudan; on the east by Ethiopia; on the south by the Democratic Republic of the Congo, Uganda and Kenya; and on the ...
,
Syria
Syria, officially the Syrian Arab Republic, is a country in West Asia located in the Eastern Mediterranean and the Levant. It borders the Mediterranean Sea to the west, Turkey to Syria–Turkey border, the north, Iraq to Iraq–Syria border, t ...
,
Tanzania
Tanzania, officially the United Republic of Tanzania, is a country in East Africa within the African Great Lakes region. It is bordered by Uganda to the northwest; Kenya to the northeast; the Indian Ocean to the east; Mozambique and Malawi to t ...
,
Venezuela
Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and many Federal Dependencies of Venezuela, islands and islets in the Caribbean Sea. It com ...
,
Vietnam
Vietnam, officially the Socialist Republic of Vietnam (SRV), is a country at the eastern edge of mainland Southeast Asia, with an area of about and a population of over 100 million, making it the world's List of countries and depende ...
, and
Yemen
Yemen, officially the Republic of Yemen, is a country in West Asia. Located in South Arabia, southern Arabia, it borders Saudi Arabia to Saudi Arabia–Yemen border, the north, Oman to Oman–Yemen border, the northeast, the south-eastern part ...
.
Members and affiliate organisations
, FATF has 38 countries as full members.
However, through several associated regional bodies, the FATF network comprised 187 countries in total, .
The FATF also works in close cooperation with several international and regional organisations.
Countries are subjected to evaluation by FATF to see that they are upholding laws and regulations enforced by FATF.
Full members
The FATF currently comprises 38 member jurisdictions and two regional organisations, representing most major financial centres in all parts of the globe:

; Regional organisations
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#
Gulf Cooperation Council
The Cooperation Council for the Arab States of the Gulf (), also known as the Gulf Cooperation Council (GCC; ), is a Regional integration, regional, intergovernmental organization, intergovernmental, political, and economic union comprising Ba ...
; Countries and other jurisdictions
#
#
#
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# (originally joined under the designation in 1991)
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# (comprises , , and )
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FATF-style regional bodies
, there are 9 "FATF-style regional bodies" that are associate members of the FATF:
*
Asia/Pacific Group on Money Laundering (APG)
*
Caribbean Financial Action Task Force (CFATF)
* Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)
* Eurasian Group (EAG)
* Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (
Moneyval, formerly PC-R-EV)
* Financial Action Task Force of Latin America (GAFILAT), formerly The Financial Action Task Force on Money Laundering in South America (GAFISUD)
*
Inter-Governmental Action Group against Money Laundering in West Africa (GIABA)
* Middle East and North Africa Financial Action Task Force (MENAFATF)
* Task Force on Money Laundering in Central Africa (GABAC)
Countries that are not full FATF members but are members of the FATF-style regional bodies are entitled to attend FATF meetings as individual member delegates of the regional bodies and to intervene on policy and operational issues.
Observer members
There are 28 international organisations with the "FATF Observer" status. These include the
International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution funded by 191 member countries, with headquarters in Washington, D.C. It is regarded as the global lender of las ...
, the
UN with six expert groups and the
World Bank
The World Bank is an international financial institution that provides loans and Grant (money), grants to the governments of Least developed countries, low- and Developing country, middle-income countries for the purposes of economic development ...
and the
OECD
The Organisation for Economic Co-operation and Development (OECD; , OCDE) is an international organization, intergovernmental organization with 38 member countries, founded in 1961 to stimulate economic progress and international trade, wor ...
. All the observer organisations have anti-money laundering as one of their tasks.
The observer organisations include:
* African Development Bank
* Anti-Money Laundering Liaison Committee of the Franc Zone (CLAB)
rench* Asian Development Bank
* Basel Committee on Banking Supervision (BCBS)
* Camden Asset Recovery Inter-agency Network (CARIN)
* Egmont Group of Financial Intelligence Units
* European Bank for Reconstruction and Development (EBRD)
* Group of International Finance Centre Supervisors
* United Nations Office on Drugs and Crime (UNODC)
* United Nations Counter-Terrorism Committee Executive Directorate (UNCTED)
Effects of FATF
The FATF has been characterized as effective in shifting laws and regulations to combat illicit financial flows. FATF incentivizes stricter regulations through its public noncomplier list, which leads financial institutions to shift resources and services away from the countries on the blacklist. This in turn motivates domestic economic and political actors in the listed countries to pressure their governments to introduce regulations that are compliant with the FATF.
As of 2012, the effect of the FATF Blacklist has been significant, and arguably has proven more important in international efforts against money laundering than the FATF Recommendations. While, under
international law
International law, also known as public international law and the law of nations, is the set of Rule of law, rules, norms, Customary law, legal customs and standards that State (polity), states and other actors feel an obligation to, and generall ...
, the FATF Blacklist carries with it no formal sanction, in reality, jurisdictions placed on the FATF Blacklist often face intense financial pressure.
FATF has made it difficult for
non-governmental organisation
A non-governmental organization (NGO) is an independent, typically nonprofit organization that operates outside government control, though it may get a significant percentage of its funding from government or corporate sources. NGOs often focus ...
s (NGOs) in many countries to access funds to aid in relief situations and conduct other important
civil society
Civil society can be understood as the "third sector" of society, distinct from government and business, and including the family and the private sphere.[Global South
Global North and Global South are terms that denote a method of grouping countries based on their defining characteristics with regard to socioeconomics and politics. According to UN Trade and Development (UNCTAD), the Global South broadly com ...]
extending well beyond civil society located in Middle Eastern and terror-ridden countries.
In 2023, FATF released new guidance on interpretation of Recommendation 8 relating to non-profits, to better prevent misuse of its standards to restrict legitimate civil society operations.
In a 2020 paper, Ronald Pol stated that while the FATF has been very successful in getting its policies adopted worldwide, the actual impact of those policies has been rather small: according to his estimates, less than 1% of illegal profits are seized, with the costs of implementing the policies being at least one hundred times larger. Pol contends that industry and policymakers consistently ignore this, instead evaluating the policies based on largely irrelevant success
metrics.
See also
*
Hawala
*
Hundi
*
Informal value transfer system
*
Politically exposed person
*
Remittance
A remittance is a non-commercial transfer of money by a foreign worker, a member of a diaspora community, or a citizen with familial ties abroad, for household income in their home country or homeland.
Money sent home by migrants competes ...
*
White-collar crime
The term "white-collar crime" refers to financially motivated, nonviolent or non-directly violent crime committed by individuals, businesses and government professionals. The crimes are believed to be committed by middle- or upper-class indivi ...
*
Wolfsberg Group
References
Further reading
* Findley, Michael G.; Daniel L. Nielson and J. C. Sharman (Fall 2013). "Using Field Experiments in International Relations: A Randomized Study of Anonymous Incorporation". ''International Organization'', Vol. 67, No. 4, pp. 657–693. .
* Müller, Sebastian R. (2006). ''Hawala: An Informal Payment System and Its Use to Finance Terrorism'',
VDM Verlag
Omniscriptum Publishing Group, formerly known as VDM Verlag Dr. Müller, is a German publishing group headquartered in Riga, Latvia. Founded in 2002 in Düsseldorf, its book production is based on print-to-order technology.
The company pub ...
,
External links
*
*
{{DEFAULTSORT:Financial Action Task Force On Money Laundering
Anti-money laundering measures
OECD
Task forces
International organizations based in France
Anti-money laundering organizations
Intergovernmental organizations