17 Sep Financial Action Task Force “FATF” – The Role they play & Importance within society
Money laundering (ML) is the process of making dirty money clean, wherein dirty money is moved in the financial system again and again so that the origin of the money can be hidden. Money generated from these illegal sources is mixed up with the legitimate money to make it clean and this money being further used for financial crime and terrorist financing.
When illegal activities produce substantial profits, the money launderers try to divert the funds without attracting unnecessary attention of the law enforcement agencies. They do this by hiding the sources, changing the form, or moving the funds to a place where they are less likely to attract attention.
This led to financial institutions to implement a process to stop money laundering’s namely anti-money laundering rules and regulations to proactively monitor their clients to prevent money laundering and corruption. Anti-money laundering laws gained global importance after the Financial Action Task Force (FATF) was created, which is an intergovernmental organisation that designs and promotes policies and standards to combat money laundering.
Currently, FATF consists of thirty-seven member jurisdictions and two regional organisation’s (European Commission and the Gulf Co-operation Council), and FATF also works in close co-operation with a number of international and regional bodies involved in combating money laundering and terrorism financing(TF). FATF has 8 associate members and 30 countries and international organisation’s for example the International Monetary Fund, the UN with six expert groups and the World Bank as observer members.
One of the main duties assigned to the FATF was to analyse money laundering and determine what were the most common tactics used for money laundering and then reflect on what was already being done to tackle financial crime and also prepare the roadmap to detect and prevent money laundering in the years to come.
Post review and analysis of the money laundering tactics, FATF issued a report containing forty recommendations to fight money laundering effectively and these recommendations have evolved over years. The first set of recommendations in 1990 were aimed at fighting drug-money laundering. The recommendations were revised in 1996 to expand their scope beyond drug-money laundering and were amended in October 2001 to include terrorist financing activities. Significantly for lawyers, in 2003, FATF amended the recommendations so that they applied to “designated non-financial businesses and professions” (“DNFBP”) who sometimes are called “gatekeepers.”
The framework for anti-money laundering standards was majorly created by FATF and after implementing this framework into action FATF began a process to publicly identify countries that were not doing good enough job to improve their anti-money laundering laws and international cooperation, a process colloquially known as “name and shame”.
The positive effects of FATF can be observed, as it made sure that funds aren’t easily accessible to terror organisations that are cause monstrous crimes against humanity. FATF has been instrumental in the fight against corruption by ‘grey-listing’ countries that do not meet recommended criteria and this helps to cripple economies and states that are aiding with terrorist and corrupted organisations. FATF also continues to work with monetary agencies to control terrorist finance activity and to bring an end to illegal financial organisations, terrorism and corruption.
To summarise, we can break down FATF’s functions in three points below:
- Monitoring members’ progress in implementing anti-money laundering measures
- Reviewing and reporting on laundering trends, techniques, and countermeasures, and
- Promoting the adoption and implementation of FATF anti-money laundering standards globally.
No Comments