Knowledgebase

FATF

The FATF’s role in the prevention of financial crime

FATF

The Financial Action Task Force, or FATF, is one of the most influential and important organizations in regard to combating financial crimes such as money laundering, terrorist financing, and other forms of corruption. The intergovernmental institution, founded in 1989, comprises 37 member countries and is headquartered in Paris.

The FATF was founded due to concern about money laundering and the threat it poses to the world financial system. Initially, the main responsibilities assigned to the Task Force were to analyze money laundering and determine what the most common tactics were, reflect on what was already being done in order to tackle financial crime and make goals for what could be accomplished in the future. After completing this research, the FATF proceeded to generate 40 recommendations that were meant to guide its members through the process of regulating the financial sector and curbing corruption.

In the early 2000s, and particularly after the September 11th terrorist attacks, world governments became more anxious about the funding of terrorism, as well as other types of financial crime. Because of these growing concerns, the FATF altered their mission and updated the recommendations given to member countries to include measures against terrorist financing. A complete revision of the Task Force’s guide and standards ensued.

In regard to terrorist financing, the FATF compiled extensive research on how terrorists get their funding, where the money comes from, what tactics they use to avoid detection and ways to prevent them from obtaining more money. A recently released document provides detailed information on wire transfers, weapons of mass destruction, and other forms of corruption that can allow terrorists to gain power and financing. The FATF also regulates and defines the notion of politically exposed persons.

The FATF’s recommendations require that participating countries not only outlaw money laundering and other forms of corruption but also require their financial institutions to take action against these crimes. All money must be confiscated from money laundering crimes, and authorities must be permitted to enforce this.

The FATF also requires that financial institutions in member countries conduct “know your customer” practices and verify the identities of clients. Records must be kept of all clients that pose a risk of corruption, and suspicious transactions and behavior must always be reported and monitored. Participating countries must have a financial unit that handles these reports and completes investigations, and they must also cooperate at the international level in regard to financial crime. If a crime related to money laundering or terrorist funding takes place across borders, countries must work together to end the criminal activity, prevent it from reoccurring in the future, and prosecute those that are responsible.

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