Financial Action Task Force on Money Laundering (FATF)

FATF Money Laundering Terrorist Financing OECD Anti-Money Laundering (AML) Financial Regulation Global Economy Risk Assessment
The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Organization for Economic Cooperation and Development (OECD) to combat money laundering and terrorist financing on a global scale through policy development and surveillance.
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Financial Action Task Force on Money Laundering (FATF)

The Financial Action Task Force (FATF) is an inter-governmental organization created by the Organization for Economic Cooperation and Development (OECD) in 1989. Its primary mission is to combat money laundering and terrorist financing by establishing international standards and promoting effective implementation of legal, regulatory, and operational measures.

Examples

  1. FATF Forty Recommendations: These are 40 guidelines created by the FATF to provide a complete set of measures for countries to use in the fight against money laundering and terrorist financing.
  2. FATF Blacklist: The FATF publishes a list of jurisdictions identified as having ineffective money laundering controls, promoting sanctions and diplomatic pressure on these jurisdictions.
  3. Mutual Evaluations: Regular assessments and peer reviews conducted by the FATF to evaluate the implementation of AML/CFT measures in member countries.
  4. Nine Special Recommendations on Terrorist Financing: Additional guidelines published by the FATF to specifically address and counteract the financing of terrorist acts.

Frequently Asked Questions (FAQs)

  1. What is the FATF?

    • The Financial Action Task Force (FATF) is an inter-governmental body established to set standards and promote effective measures for combating money laundering and terrorist financing globally.

  2. What are the FATF Forty Recommendations?

    • They are a comprehensive set of guidelines issued by the FATF to help countries develop effective mechanisms to combat money laundering and terrorist financing.

  3. What is the significance of the FATF Blacklist?

    • The FATF Blacklist identifies jurisdictions that have deficient anti-money laundering (AML) and counter-terrorist financing (CFT) measures, spurring international pressure and sanctions to improve these controls.

  4. How does the FATF work with member countries?

    • The FATF conducts peer reviews, known as mutual evaluations, to assess how well its recommendations are being implemented by member countries, offering guidance and support for improvement.

  5. What is FATF’s focus regarding terrorist financing?

    • FATF also focuses on combating terrorist financing through its Nine Special Recommendations, which are designed to detect, prevent, and mitigate financing activities related to terrorism.
  • Money Laundering: The process of making large amounts of money generated by a criminal activity appear to have come from a legitimate source.
  • Counter-Terrorist Financing (CFT): Measures and policies specifically designed to prevent and combat the financing of terrorist operations.
  • Organization for Economic Cooperation and Development (OECD): An international organization that works to build better policies for better lives and promotes policies that improve the economic and social well-being of people around the world.
  • AML/CFT: Acronym for Anti-Money Laundering and Counter-Terrorist Financing.

Online Resources

Suggested Books for Further Studies

  1. “International Guide to Money Laundering Law and Practice” by Arun Srivastava
  2. “Anti-Money Laundering: International Law and Practice” by Wouter H. Muller
  3. “Global Counter-Terrorist Financing and Soft Law” by Doron Goldbarsht

Accounting Basics: “Financial Action Task Force on Money Laundering (FATF)” Fundamentals Quiz

### What year was the Financial Action Task Force (FATF) established? - [x] 1989 - [ ] 1995 - [ ] 2000 - [ ] 2010 > **Explanation:** The FATF was established in 1989 by the Organization for Economic Cooperation and Development (OECD). ### What is the primary objective of the FATF? - [ ] To increase tax revenues globally. - [ ] To regulate stock markets worldwide. - [x] To combat money laundering and terrorist financing. - [ ] To control global interest rates. > **Explanation:** The main objective of FATF is to combat money laundering and terrorist financing by setting international standards and promoting their effective implementation. ### What document outlines the FATF’s policy measures against money laundering? - [x] FATF Forty Recommendations - [ ] Basel Accords - [ ] International Financial Reporting Standards - [ ] IMF Monetary Policies > **Explanation:** The FATF Forty Recommendations provide a comprehensive framework for combating money laundering and terrorist financing. ### What instrument does the FATF use to identify high-risk and non-cooperative jurisdictions? - [ ] A global financial survey - [x] FATF Blacklist - [ ] Annual economic forum - [ ] National audit reports > **Explanation:** The FATF Blacklist identifies jurisdictions that have deficient anti-money laundering and counter-terrorist financing measures. ### How often does the FATF conduct mutual evaluations of its member countries? - [ ] Every year - [ ] Every two years - [x] Every five to six years - [ ] Every decade > **Explanation:** FATF conducts mutual evaluations of its member countries on a scheduled basis, typically every five to six years, to assess the implementation of AML/CFT measures. ### Which organization established the FATF? - [x] Organization for Economic Cooperation and Development (OECD) - [ ] United Nations - [ ] World Bank - [ ] International Monetary Fund (IMF) > **Explanation:** The Organization for Economic Cooperation and Development (OECD) established the FATF in 1989. ### What additional guidelines has FATF published to address terrorist financing? - [x] Nine Special Recommendations on Terrorist Financing - [ ] Forty-Plus Recommendations - [ ] Global Security Protocol - [ ] Anti-Financial Crime Directive > **Explanation:** The Nine Special Recommendations on Terrorist Financing were published by FATF to specifically counteract the financing of terrorism. ### Who benefits from the FATF’s recommendations and guidelines? - [ ] Only developed countries - [ ] Only emerging markets - [x] All countries globally - [ ] Only financial institutions > **Explanation:** The FATF’s recommendations and guidelines are designed to benefit all countries globally, enhancing their ability to combat money laundering and terrorist financing. ### What does AML/CFT stand for? - [ ] Accounting Management Letters/Chief Financial Transactions - [x] Anti-Money Laundering/Counter-Terrorist Financing - [ ] Asset Management Logistics/Currency Financial Trade - [ ] Annual Monetary Ledger/Corporate Fund Transfers > **Explanation:** AML/CFT stands for Anti-Money Laundering and Counter-Terrorist Financing. ### Why are the FATF’s recommendations important for the global financial system? - [ ] They promote higher interest rates. - [x] They create a standard framework for preventing financial crimes. - [ ] They facilitate easier tax collection. - [ ] They enhance government control over markets. > **Explanation:** The FATF’s recommendations provide a standardized framework for preventing financial crimes like money laundering and terrorist financing, thereby securing the global financial system.
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