Financial Crime

Financial Action Task Force

AML/CFT standards - FATF publishes report on compliance - 19 April 2022

The Financial Action Task Force (FATF) has published a report on the state of effectiveness of its anti-money laundering (AML) and countering the financing of terrorism (CFT) standards. The report is based on data from the FATF and FATF-Style Regional Body (FRSB) mutual evaluation reports since 2013, which have assessed the strengths and weaknesses of national frameworks in tackling AML/CFT crimes.

Overall, the report finds that countries have made “huge progress” in improving technical compliance through a broad range of laws and regulations to better tackle money laundering, and terrorist and proliferation financing. FATF notes that this has created a firm legislative basis for national competent authorities to “follow the money” that fuels crime and terrorism.

FATF highlights that 76% of countries have now satisfactorily implemented its ‘40 Recommendations’, up from 36% in 2012. However, the report also highlights that many countries still face substantial challenges in taking effective action in line with the risks they face. This includes difficulties in investigating and prosecuting high-profile cross-border cases and preventing anonymous shell companies and trusts being used for illicit purposes.

The report informed FATF’s Strategic Review, which aims to make the next cycle of FATF assessments more timely, risk-based and effective. In light of the results from the current (4^th) round, FATF has made changes to its assessment of countries’ actions in the 5^th round. These changes include:

• a significantly shorter mutual evaluation cycle of six years rather than 10 years, so that countries will be assessed more frequently;
• a results-orientated follow-up assessment process, which will focus on specific actions to tackle money laundering, terrorist financing and the financing of weapons of mass destruction; and
• after their mutual evaluation, countries will have three years to take action and address any deficiencies. If they fail to do so, they will automatically face a range of “enhanced measures”.

In anticipation of the 5^th round of assessments, FATF has published its ‘Methodology’ and ‘Procedures’ documents. These are not yet in effect and may change before the start of the 5^th round.

FATF Report on the State of Effectiveness and Compliance with the FATF Standards

FATF Methodology

Information note: 5^th Round FATF Methodology

FATF Procedures

Information note: 5^th Round FATF Procedures

Press release