The FATF (Financial Action Task Force) is an intergovernmental organization that designs and promotes policies and standards to fight financial crime. The recommendations made by the FATF cover money laundering, terrorism financing, and other threats to the global financial system. It was created in 1989 at the request of the G7 and has its headquarters in Paris.

What is the Financial Action Task Force (FATF)?

The Financial Action Task Force is a global money laundering and terrorism financing watchdog. Intergovernmental organizations have set international standards to combat these illegal activities and consequent harm to society. As a decision-making body, it strives to generate the political will necessary to bring about national legislative and regulatory reform in these areas. More than 200 countries and jurisdictions are working to make it happen. It has developed the FATF Recommendations and the FATF Standard to ensure a coordinated global response to combat organized financial crime, corruption, and terrorism. They help the government o block suspicious transaction of financial criminal to prevent trade of illegal drugs, human trafficking, and other financial criminals.

The FATF works to combat the illegal financing of weapons of mass destruction. Financial Action Task Force is consistently measuring standards of the regulations to prevent money laundering and to combat financing of terrorism by continuously tightening standards to address new risks, such as virtual asset regulation and the global circulation of cryptocurrencies. It ensures that countries are fully and effectively adopting the FATF standard and accounts to be compliant with it.

How Does FATF Combat Money Laundering?

Money laundering is a threat to the normal operation of the financial eco-system. But a recorded suspicious activity of financial transactions can help to identify criminals and criminal organizations by finding hidden monetary assets during investigations of Suspicious Activity Reports (SARs). Most importantly, depriving criminals of illicit enrichment by money-laundering activity, ultimately prevents financial corruption and relailates financial criminals by consistent compliance efforts of financial institutions.

Functions of the Financial Action Task Force

The Financial Action Task Force is an intergovernmental decision-making body that aims to set international standards and to develop and promote policies at the national and international levels to combat money laundering or the financing of terrorism. It was founded in 1989 to present the measures taken in the fight against money laundering. Since then, it has issued 40 recommendations against money laundering and 9 special recommendations to combat the financing of terrorism.

Members of the Financial Action Task Force

In 2018, the Financial Action Working Group had 37 members, including the European Commission and the Gulf Cooperation Committee. To become a member, a country is considered a strategically important bridge. Other important international organizations should be involved. Upon becoming a member, a state or organization must accept and support the latest FATF recommendations, commit to be reviewed and evaluated by other members and work with the Financial Action Task Force to develop recommendations. Several international organizations join Financial Action Task Force as observers, having participated in anti-money laundering activities. These organizations include Interpol, the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF) and the World Bank.