Which is a FATF characteristic used to assess a country's effectiveness of its AML regime?
Click on the arrows to vote for the correct answer
A. B. C. D.A
https://www.fatf-gafi.org/media/fatf/documents/methodology/FATF%20Methodology%2022%20Feb%202013.pdf(19)
The Financial Action Task Force (FATF) is an international inter-governmental body that sets standards and promotes effective implementation of legal, regulatory and operational measures to combat money laundering, terrorist financing, and other related threats to the integrity of the international financial system.
One of the key activities of the FATF is to assess countries' effectiveness in combating money laundering and terrorist financing through a mutual evaluation process. As part of this process, the FATF uses a set of 11 Immediate Outcomes (IOs) to evaluate whether a country has implemented the necessary measures to effectively combat money laundering and terrorist financing.
The four answer choices provided in the question all relate to different Immediate Outcomes that the FATF uses to assess a country's effectiveness of its AML regime. The correct answer is the option that reflects one of the Immediate Outcomes used by the FATF to assess a country's AML regime.
The Immediate Outcome relevant to option A is IO1 - "Risks are understood and actions implemented to mitigate them." This means that a country should have an understanding of the money laundering and terrorist financing risks it faces and should have implemented measures to mitigate those risks, including preventing funds supporting and proceeding from crime or terrorism from entering the financial sector.
The Immediate Outcome relevant to option B is IO2 - "Legal persons and arrangements are prevented from misuse for money laundering and terrorist financing." This means that a country should have measures in place to prevent legal persons (such as companies) and arrangements (such as trusts) from being misused for money laundering and terrorist financing.
The Immediate Outcome relevant to option C is IO3 - "Supervisors appropriately supervise, monitor, and regulate financial institutions (FIs)." This means that a country should have effective supervision and regulation of financial institutions (such as banks) to ensure they are implementing measures to combat money laundering and terrorist financing.
The Immediate Outcome relevant to option D is IO4 - "Financial institutions are adequately applying preventive measures." This means that financial institutions (FIs) should have effective measures in place to prevent and detect money laundering and terrorist financing.
Therefore, the correct answer to the question is D - "FIs adequately apply preventive measures." This is an Immediate Outcome used by the FATF to assess a country's effectiveness of its AML regime, and it reflects the importance of effective implementation of preventive measures by financial institutions in combating money laundering and terrorist financing.