Founded on the request of the G7 in 1989, the Financial Action Task Force (or FATF) is an international organisation that sets the global standard for countering ‘money laundering, the financing of terrorism and proliferation of weapons of mass destruction.’ Made up of 37 member countries, the FATF is widely considered to be the most influential institution dedicated to tackling financial corruption.
Essentially, the FATF ensures that its members are taking the necessary steps to uphold their nation’s financial integrity, and implement preventative measures like economic sanctions and mandatory due diligence.
Which countries are members of the FATF?
At present, there are 37 countries that are members of the FATF, as well as 2 regional organisations – the European Commission and the Gulf Co-operation Council. These member jurisdictions include most major economies across the globe; check out the list below to see which countries are participating.
- Hong Kong
- Republic of Korea
- New Zealand
- Russian Federation
- Saudi Arabia
- South Africa
- United Kingdom
- United States
The FATF Blacklist
Since 2000, the FATF has released an annual list of “non-cooperative countries or territories” (also known as NCCTs). These are the nations that failed to work with member jurisdictions to aid the international effort to quash money laundering and other financial crimes. This was known as the FATF Blacklist, but has more recently been dubbed the Call for Action list.
If a country or territory is placed on the FATF Greylist (now known as the list of Other Monitored Jurisdictions), this should be considered an official warning. It indicates that if they do not begin to implement the necessary measures indicated in the FATF recommendations, they will soon be blacklisted.
In 1990, the FATF issued a list of 40 formal recommendations relating to the prevention of money laundering, which have since been updated to incorporate measures against terrorism financing too, last amended in 2012. These recommendations form the basis for money laundering regulations all over the world. Here are some of the most significant recommendations which participating nations must put in place:
- Money laundering must be criminalised, and the authorities must be able to legally confiscate the proceeds of it.
- A risk-based approach should be established; assess how vulnerable your business is to money laundering and then put appropriate combative measures in place.
- Every member jurisdiction must implement an economic sanctions process, to penalise persons or entities who are guilty of financial crimes and prevent further offences from taking place.
- All individuals and organisations in FATF countries are legally obliged to report suspicious transactions to the relevant financial authority.
What does the FATF mean for AML compliance?
The recommendations of the FATF feed heavily into the different pillars of AML compliance for businesses in the UK. For example, the FATF defines the concept of PEPs (or politically exposed persons), and PEP compliance is crucial in meeting AML regulations. Screening your potential client or customer against PEP lists can protect your firm from working with individuals that are more vulnerable to bribery and corruption, due to their prominence in public society.
As well as PEP screenings, the FATF asks that financial organisations carry out KYC (know your customer) checks prior to dealing with them, in order to verify their identity. These checks, which are also known as customer due diligence, usually entail confirming your prospective customer’s name, date of birth and address by searching for them on sanctions lists and the like.
How can SmartSearch help?
Checks like PEP and KYC screenings are extremely time-consuming to carry out manually, and an inefficient use of company resources. The SmartSearch verification tool is a unique platform which hugely simplifies AML checks. Using our automated system, we can perform thorough KYC, sanctions and PEP screenings on the Dow Jones WatchList, which is updated daily for maximum accuracy.
Looking for a convenient, foolproof way to ensure that your company is AML compliant? Our end-to-end AML solution is approved by JMLSG. This steering group is comprised of the leading UK trade associations in the financial services industry, so you can rest assured that SmartSearch is a safe pair of hands..