Assessing Countries’ Anti-Money Laundering and Counter-Terrorist Financing Systems
The Financial Action Task Force (FATF) Recommendations provide a framework for countries to prevent and combat money laundering and terrorist financing. Assessing the effectiveness of these systems is crucial in ensuring global financial stability. This article outlines a methodology for evaluating countries’ Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) systems against the FATF Recommendations.
Assessment Components
The assessment focuses on two main components:
Technical Compliance
Evaluates whether the country has implemented the specific requirements of the FATF Recommendations, including laws, regulations, and institutional frameworks.
Key aspects of technical compliance include:
- Implementing specific requirements of the FATF Recommendations
- Evaluating the framework of laws and enforceable means
- Assessing the existence, powers, and procedures of competent authorities
Effectiveness
Assesses the effectiveness of the AML/CFT system in practice, including measures such as sanctions, international cooperation, and the ability to prevent and investigate crimes.
The effectiveness component includes evaluating measures such as:
- Sanctions applied to ensure future compliance and deter non-compliance by others
- International cooperation, including cross-border investigations and supervision of international groups
- Draft legislation and proposals that may affect AML/CFT systems
Assessment Criteria
Assessors will reach a conclusion about the extent to which a country complies (or not) with each Recommendation, using four possible levels of compliance:
- Compliant: The country has implemented the relevant FATF Recommendations.
- Largely Compliant: The country has substantially achieved the requirements, but some issues remain.
- Partially Compliant: The country has partially achieved the requirements.
- Non-Compliant: The country does not meet the requirements.
In exceptional circumstances, a Recommendation may also be rated as “not applicable”.
Methodology Emphasis
The assessment methodology emphasizes that assessors should only consider laws, regulations, or other AML/CFT measures that are in force by the end of the on-site visit. It also highlights the importance of considering FATF Guidance as background information, but not incorporating it into the assessment.