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FATF Calls for Holistic Approach to Combat Financial Crime

A comprehensive report by the Financial Action Task Force (FATF) has emphasized the need for a unified approach to tackle financial crime. The organization’s latest research highlights the importance of effective system leadership, coordination, and supervision in delivering successful outcomes.

The Need for a Whole System Approach

The FATF report stresses that a “whole system” approach is crucial in combating financial crime, as criminals operate across borders and jurisdictions. To achieve this, the organization recommends:

Creating a clearer structure across priorities
Deconflicting competing legislative frameworks
Outlining performance objectives
Coordinating data sharing concerning financial crime information

Risk-Based Approach Remains Critical

The report also reiterates the importance of the risk-based approach in driving continued improvements in combating financial crime. Intelligence sharing, collective prioritization, and coherence between policymakers and supervisors are key enablers to this approach.

Addressing Mismatch between Inputs and Outcomes

However, the report notes that there is still a mismatch between what is put into the system and the outcomes achieved. This is particularly true in relation to input from the private sector, where resources are mobilized to meet reporting obligations but are not always effectively utilized by Financial Intelligence Units (FIUs).

Fundamental Building Blocks

The FATF report emphasizes that building blocks of a strong anti-financial crime framework must be addressed holistically. The organization’s global network encompasses jurisdictions at different levels of maturity in terms of capabilities, and implementation of the fundamentals of Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) and broader financial crime risk management is critical.

Courage Needed for Change

Ultimately, the report concludes that courage is needed to achieve greater success. Investment in time and resources must deliver tangible outcomes, and a unified approach is essential in combating financial crime.

The FATF report highlights the importance of standards for information sharing, which has been a consistent theme across its research. Effective cross-institutional, cross-sector, and cross-border data exchange must be the ambition, reflecting the reality of organized, international criminal activity.

Challenges remain in group-wide sharing
Inconsistency exists across jurisdictions

Future Directions

The report recommends:

Strengthening the basis for implementation of R.2 and revising the associated interpretative note to ensure increased cooperation and coordination between financial crime and data privacy authorities
Revising FATF standards to incorporate a new standard on establishing domestic and cross-border information sharing mechanisms as part of a key metric for an effective anti-financial crime system

Building on the work of the German FATF Presidency, it is time to consider further changes to the FATF standards.