Financial Action Task Force (FATF)

Understanding the Financial Action Task Force (FATF)

The Financial Action Task Force (FATF), also known as Group d’action financière (GAFI), is a global organization dedicated to combating money laundering and terrorist financing (AML/CFT). Established in 1989 by the G7, the FATF initially consisted of 16 members. However, it has since grown to include 39 members as of 2021. Following the 9/11 terrorist attacks, the FATF’s mandate was expanded in 2001 to encompass terrorist financing as well.

The FATF’s main responsibilities revolve around monitoring money laundering trends, tracking legislative, financial, and law enforcement activities at both national and international levels, and issuing recommendations and standards to combat money laundering. Additionally, the organization provides reports on compliance in these areas.

The global standard for anti-money laundering and anti-terrorist financing set by the FATF is outlined in the Forty Recommendations on Money Laundering and Nine Special Recommendations on Terror Financing. These recommendations allow member states to implement measures tailored to their specific circumstances and constitutional framework.

In 2010, the FATF introduced the FATF Black List, officially known as the list of Non-Cooperative Countries or Territories (NCCT). This list includes jurisdictions that exhibit a lack of cooperation in international efforts to combat money laundering and terrorist financing. Lack of cooperation may involve the refusal to provide bank or brokerage account records, customer identification, beneficial ownership information related to these accounts, as well as information on shell companies and other financial entities commonly used for money laundering.

In June 2019, the FATF updated its Standards by publishing guidance on “A Risk-based Approach to Virtual Assets and Virtual Asset Service Providers (VASPs).” This guidance includes the FATF Travel Rule, which mandates exchanges to share compliant user information with one another. The FATF is scheduled to convene in late June 2021 to revise its recommendations concerning crypto assets.

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