Financial Action Task Force (FATF) Recommendations

B

The Financial Action Task Force (FATF) is an intergovernmental organization that sets standards and promotes the implementation of measures to combat money laundering, terrorist financing, and other related threats to the integrity of the international financial system.

The FATF has established a system of mutual evaluations, where member countries are reviewed on a regular basis to assess their compliance with the FATF's recommendations and the effectiveness of their anti-money laundering and counter-terrorist financing (AML/CFT) measures.

If a jurisdiction is found to have "strategic deficiencies" in its AML/CFT regime, the FATF may identify it as a "high-risk jurisdiction" and call upon its members and the international community to take action. In this context, the FATF recommends the application of counter-measures against the jurisdiction.

Counter-measures are a range of actions that countries can take to protect their financial systems from the identified risks posed by the high-risk jurisdiction. They can include measures such as enhanced due diligence, heightened reporting requirements, restrictions on financial transactions, and even severing correspondent banking relationships.

The application of counter-measures is intended to encourage the high-risk jurisdiction to address its AML/CFT deficiencies and improve its compliance with the FATF standards. The FATF closely monitors the progress of the jurisdiction in implementing the necessary reforms and can remove it from the list of high-risk jurisdictions if sufficient progress is made.

It is important to note that the FATF does not have the authority to add a jurisdiction to the United Nations' list of sanctioned jurisdictions, nor does it require countries to create an action plan to address deficiencies without its support. However, countries may choose to take these additional steps based on their own assessments of the risks posed by the high-risk jurisdiction.