Financial Action Task Force on Money Laundering

The Financial Action Task Force on Money Laundering (FATF), also known by its French name "Groupe d'action financière sur le blanchiment de capitaux" (GAFI), is an inter-governmental body founded in 1989 by the G7. The purpose of the FATF is to develop policies to combat money laundering and terrorist financing. The FATF Secretariat is housed at the headquarters of the OECD in Paris.

The FATF Forty Recommendations and Special Recommendations on Terrorist Financing

The primary policies issued by the FATF are the [http://www.fatf-gafi.org/document/28/0,2340,en_32250379_32236930_33658140_1_1_1_1,00.html Forty Recommendations] on money laundering and the [http://www.fatf-gafi.org/document/9/0,2340,en_32250379_32236920_34032073_1_1_1_1,00.html Special Recommendations on Terrorist Financing]

Together, the Forty Recommendation and Special Recommendations on Terrorist Financing set the international standard for anti-money laundering measures and combating the financing of terrorism. Both sets of FATF Recommendations are intended to be implemented at the national level through legislation and other legally binding measures.

The FATF issued the Forty Recommendations in 1990 and completely revised them in 1996 and 2003. The current (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 (eg 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.

The FATF issued 8 Special Recommendations on Terrorist Financing in October 2001, following the September 11 terrorist attacks in the United States. The FATF issued a ninth Special Recommendation on Terrorist Financing in October 2004.

The Special Recommendations on Terrorist Financing broadly extend the application of the Forty Recommendations to terrorist financing and introduce new requirements relating to services such as alternative remittance, wire transfers and cash couriers as well as non-profit organisations.

List of Non-Cooperative Countries or Territories

In addition to FATF's "Forty plus Nine" Recommendations, in 2000 FATF issued a list of "Non-Cooperative Countries or Territories" (or "NCCTs", and 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, terrorist 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 company, and other financial vehicles commonly used in money laundering.

The effect of the FATF Blacklist has been significant, and arguably has proven more important in international efforts against money laundering than has the FATF Recommendations. While, under international law, the FATF Blacklist carries with it no formal sanction, in reality, a jurisdiction placed on the FATF Blacklist often finds itself under intense financial pressure. As a result of the FATF 40+8 Recommendations (among other initiatives), most countries now require their banks to report certain suspicious financial activities to the appropriate financial regulators and law enforcement authorities. (In the United States, these are called Suspicious Activity Reports or S.A.R.'s.) Most larger countries with significant financial centers consider transactions coming from or transferring to a jurisdiction on the FATF Blacklist to be a suspicious activity, which automatically triggers closer regulatory scrutiny (and considerably more paperwork on the bank's part). Because of this, many major financial institutions will not conduct business with counterparts based in NCCTs. Since many of the countries that FATF originally listed as NCCTs have major financial industries (i.e., the Bahamas, Cayman Islands, Liechtenstein), such "de facto" boycotts could have a significant effect on a country's economy (or at least a politically powerful sector of the economy).

To date, of the 23 jurisdictions originally named by FATF as NCCTs, all but one have changed their laws and instituted other changes (such as creating Financial Intelligence Units) to convince FATF members to remove them from the Blacklist.

Members

The FATF membership is currently made up of 32 countries and territories and 2 regional organisations. The FATF also works in close co-operation with a number of international and regional bodies involved in combating money laundering and terrorist financing.

#Argentina
#Australia
#Austria
#Belgium
#Brazil
#Canada
#China
#Denmark
#European Commission
#Finland
#France
#Germany
#Greece
#Gulf Co-operation Council
#Hong Kong, China
#Iceland
#Ireland
#Italy
#Japan
# Kingdom of the Netherlands*
#Luxembourg
#Mexico
#New Zealand
#Norway
#Portugal
#Russian Federation
#Singapore
#South Africa
#Spain
#Sweden
#Switzerland
#Turkey
#United Kingdom
#United States

* the Kingdom of the Netherlands: the Netherlands, the Netherlands Antilles and Aruba.

FATF Associate Members

* The Asia/Pacific Group on Money Laundering (APG)
* Caribbean Financial Action Task Force (CFATF)
* The Council of Europe Select Committee of Experts on the Evaluation of Anti-Money Landering Measures (MONEYVAL) - formerly PC-R-EV
* The Financial Action Task Force on Money Laundering in South America (GAFISUD)
* Middle East and North Africa Financial Action Task Force (MENAFATF)

Observer members

Republic of Korea, India, the 8 FATF-Style Regional Bodies and several international organisations including the International Monetary Fund and the World Bank hold observer status with the FATF.

ee also

* Anti-money laundering
* FATF Blacklist
* FATF-Style Regional Bodies

External links

* [http://www.fatf-gafi.org Financial Action Task Force on Money Laundering]
* [http://www.fatf-gafi.org/dataoecd/0/0/37029619.pdf FATF Annual Review of Non-Cooperative Countries and Territories, 2005-2006]
* [http://www.rohanbedi.com/FATF40.pdf A review of the FATF Principles - 'The Global Standard' from Rohanbedi.com]
* [http://www.antimoneylaunderingtraining.com/ Training and seminars on FATF, etc interpretation, application, compliance and implementation] from The Anti Money Laundering Network
* [http://www.socamlpro.org/ Analysis and comparison of FATF / similar bodies provisions] - for members of The Society of Anti Money Laundering Professionals.

External sources

Hawala. An Informal Payment System and Its Use to Finance Terrorism by Sebastian R. Müller, Dec. 2006, VDM Verlag, ISBN: ISBN-10: 3865506569, ISBN-13: 978-3865506566