Financial Crime World

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FATF Recommendations: Combating Money Laundering and Terrorist Financing

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Preventive Measures

Countries are urged to identify non-profit organizations (NPOs) that fall under the FATF definition and assess their terrorist financing risks. To mitigate these risks, countries should implement focused, proportionate, and risk-based measures without unduly disrupting or discouraging legitimate NPO activities.

Financial Institution Secrecy Laws

Countries must ensure that financial institution secrecy laws do not hinder the implementation of anti-money laundering (AML) and combating the financing of terrorism (CFT) measures.

Customer Due Diligence

Financial institutions should conduct customer due diligence (CDD) on all new customers, including:

  • Politically Exposed Persons (PEPs)
  • Existing customers with material changes

CDD measures should include:

  • Identifying the customer and verifying their identity
  • Assessing the purpose and intended nature of the business relationship
  • Conducting ongoing monitoring of the business relationship

Record-Keeping

Financial institutions should maintain all necessary records on transactions, including domestic and international transactions, for at least five years. These records must be sufficient to permit reconstruction of individual transactions and provide evidence for prosecution of criminal activity.

Additional Measures for Specific Customers and Activities

  • Politically Exposed Persons (PEPs): Financial institutions should take additional measures when dealing with PEPs, including:
    • Obtaining senior management approval
    • Conducting enhanced ongoing monitoring
  • Correspondent Banking: Financial institutions should gather sufficient information about respondent institutions, assess their AML/CFT controls, and obtain approval from senior management before establishing new correspondent relationships.

These recommendations aim to prevent the misuse of financial systems for terrorist financing and money laundering. Effective implementation of these measures is crucial in preventing the spread of terrorism and organized crime.

Sources

  • FATF (Financial Action Task Force) Recommendations on Combating Money Laundering and Terrorist Financing
  • [Insert relevant sources or references]

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