Global IDV and Monitoring with Red Flag Alert
by Niamh Hunter
The Financial Action Task Force (also known by the French name Groupe d’action financière) is a global intergovernmental organisation dedicated to studying and helping governments combat money laundering and terrorist financing.
The FATF is a policy making body not a law enforcement agency and has the objective to defend the integrity of the global financial system by setting standards and promoting the implementation of legal, regulatory and operational measures that governments should enforce to combat money laundering and terrorism financing; as well as other serious financial crimes that could threaten the international economy.
The FATF also works with national governments, financial institutions and citizens to generate the political will and desire to combat money laundering on both a national and international level.
Over 200 countries and jurisdictions have subscribed to the FATF’s recommendations. The FATF, with the help of nine associate member organisations, the IMF and World Bank, assesses that these standards have been implemented properly and are being upheld on an ongoing basis.
How did they start?
The FATF was founded by the G7 in Paris in 1989 (at the G7 summit) to combat money laundering. As globalisation had started to take place in earnest, especially with global financial systems becoming more interlinked, money laundering was becoming an increasing problem.
The FATF was mandated with studying the trends in money laundering and the methods employed to wash funds, with the view to creating a set of standards and recommendations to detect, deter and counter such activity.
By the end of the year, the FATF had published its forty recommendations for fighting money laundering. These recommendations have been adjusted over time as technology and techniques used for money laundering have changed.
The addition of terrorism financing to the FATF’s mandate was made in 2001 following 9/11 and the beginning of the War on Terror.
What do they do?
The FATF has created and maintains the 40 recommendations on money laundering and 9 special recommendations on terrorist financing. Should adjustments or additions need to be made then they will, but that only takes place very rarely.
One of the FATF’s other principle functions is in researching and understanding money laundering on a global scale and within individual countries. Via this research they aim to detect changes and shifts in the patterns of global money laundering, the emergence of any new techniques or threats and individual governments commitment to fighting money laundering (via adherence to the 40 recommendations).
They then work with governments and financial institutions as advisors on money laundering and terrorism financing, and how to introduce the measures and legislation needed to counter it. Should this prove to be ineffective, they then work with the international political community as well as local political and citizen groups to apply pressure and create the political will to adopt the necessary changes and work with the international community to fight financial crimes.
The FATF maintains two lists of countries that serve to warn the international community that they carry an increased danger of financial crimes.
These lists are: a greylist of countries that are currently under increased monitoring and that do not meet the required standards but are working with the FATF to improve; and a blacklist of high risk countries that pose a severe risk of financial crime and that are not working with the FATF.
The FATF Greylist
- Bulgaria
- Burkina Faso
- Cameroon
- Democratic Republic of the Congo
- Croatia
- Haiti
- Jamaica
- Kenya
- Mali
- Mozambique
- Namibia
- Nigeria
- Philippines
- Senegal
- South Africa
- South Sudan
- Syria
- Tanzania
- Turkey
- Vietnam
- Yemen
The FATF Blacklist
- Iran
- Myanmar
- North Korea
Who are the members?
The FATF has 38 member countries (one being Russia which has been suspended) and two member organisations (the European Commission and Gulf Cooperation Council) which represent all the major global financial centres.
The FATF also partners with nine similar style regional bodies that have fighting money laundering and/or terrorism financing as one of their mandates. Any countries that are members of these groups are considered associate members of the FATF and bring the number of countries in their network to 187. Examples of these associate members are Asia/Pacific Group on Money Laundering, Caribbean Financial Action Task Force, and Task Force on Money Laundering in Central Africa.
Does my business need to comply with the 40 recommendations?
The FATF has been very successful in getting their recommendations used by governments as the basis for their anti-money laundering regulations, and the UK is one such country. UK law dictates which sectors must adhere to anti-money laundering procedures; collectively these are known as the regulated sector.
If you are part of the regulated sector, you must comply with UK regulations and risk large fines, professional disqualification and jail time if you do not.
Red Flag Alert features a suite of fully compliant anti-money laundering and enhanced due diligence checks which form an important part of your compliance. Our cutting edge technology reduces the staff time needed to send out a check to just 30 seconds and our AI powered checks are completed off your customer’s device and utilise facial recognition technology, liveness checks and document verification technology.
To see how we can help make compliance easy for your business, get a free AML check.
