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07 November 2013 Supervision Supervision label Factsheet

How does the table of contents read? Established in 1989, the Financial Action Task Force is an intergovernmental body that pursues the fight against money laundering an terrorist financing.

The 34 current Member States include the Kingdom of the Netherlands; over 180 countries are associate members through several regional organisations.

Objectives

  1. Establishment of an international standard for the prevention of money laundering and terrorist financing, and the assessment of implementations of this standard (mutual evaluation process). The FATF has drawn up 40 Recommendations and it expects countries to implement these in their national legislation and to see that the implementation is effective in countering money laundering and terrorist financing. The FATF regularly monitors countries' adherence to the recommendations.
  2. Drafting of guidance, best practices and typologies[1] which support countries and institutions in implementing the standard and which help identify new risks relating to money laundering and terrorist financing.
  3. Identification of high risks and of non-cooperative countries (black and grey lists) posing an increased risk of money laundering and terrorist financing. Three times a year, the FATF draws up a list of countries whose implementation of the FATF recommendations has been unsatisfactory. It expects its Members to take adequate measures to mitigate the risks associated with those countries.

FATF Standard 

Adopted in 1990 by the FATF and reviewed in 2012, the '40 Recommendations to combat money laundering' and terrorist financing are recognised as international standards on AML/CFT. The scope of the Recommendations includes improvement of national legal systems with respect to combating money laundering and terrorist financing, the role of financial institutions and the reinforcement of international cooperation. The Recommendations that regard the role of financial institutions concentrate on the establishment and verification of the identity of clients or third parties, on the attention given to unusual or suspect transactions and high-risk relations, and on the development of internal procedures and measures to prevent institutions from involvement in money laundering practices. Other Recommendations regard several measures such as freezing the assets of terrorists and attaching information to wire transfers.

Evaluations 

All FATF Member States are subjected to evaluations by the FATF. During an evaluation, a team of diverse experts from other FATF Member States assesses a country's national anti-money laundering and anti-terrorist financing framework. The evaluation reports are an important source for countries and financial institutions in ascertaining how a national framework has been set up. The reports are published on the FATF website.

In 2013, the FATF has published its new evaluation methodology. The new methodology focuses on two aspects of a national framework.

  1. Technical compliance, where the legal and institutional framework is held up to the 40 Recommendations
  2. Effectiveness, in terms of the results expected from an effective framework, where the framework is assessed against the 11 'results' drawn up by the FATF.

Countries will be given ratings on both aspects. In coming years the methodology will be used both by the FATF and by the regional organisations in country evaluations.

Guidance, Typologies 

An important element in the work of the FATF is that it brings together anti-money laundering and anti-terrorist financing experts to review and analyse newly identified money laundering and terrorist funding methods. Several projects launched each year under the aegis of the FATF result in a so-called Typologies Report. Two of the subjects researched in recent years are: ‘New payment methods’ and ‘Misuse of legal professions’. Once finalised, the reports are published on the FATF website. Also, the FATF regularly publishes guidance to support countries and institutions in implementing the standard. Examples are the guidance documents on on 'politically exposed persons' and on 'new payment products and services'.

High-risk and non-cooperative countries 

After every plenary FATF meeting, the FATF issues warning lists identifying jurisdictions that have strategic deficiencies in their regimes for anti-money laundering and combating terrorist financing. These warning lists are published on the FATF website and DNB points institutions to the lists by means of news releases published on its Open Book on Supervision. Also, DNB has published a Q&A explaining how institutions should respond to the FATF warning lists in the context of compliance with the Anti-Money Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van Witwassen en de Financiering van Terrorisme).

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[1] Comparative study and analysis of various forms of money laundering and/or terrorist financing

Related laws and regulations

Relevant to:

  • Clearing & Settlement Systems
  • Clearing institutions
  • Insurers
  • Investment firms
  • Payment institutions
  • Pension funds
  • Trust offices