Financial Action Task Force Guidelines: Enhancing Anti-Money Laundering and Counter-Terrorist Financing Measures

The Financial Action Task Force (FATF), an inter-governmental body, has published guidelines to protect the global financial system against money laundering, terrorist financing, and proliferation financing. The following are key points extracted from these guidelines:

Customer Due Diligence (CDD) Measures

Financial institutions must apply CDD measures to all new customers, including:

• Verifying the identity of the customer and beneficial owner
• Assessing the risk level
• Conducting ongoing monitoring

Risk-Based Approach

Countries may permit financial institutions to complete verification as soon as reasonably practicable following the establishment of the relationship, where the money laundering and terrorist financing risks are effectively managed.

Record-Keeping

Financial institutions should maintain all necessary records on transactions for at least five years, including:

• Sufficient information to reconstruct individual transactions
• Evidence for prosecution of criminal activity

Politically Exposed Persons (PEPs)

Financial institutions must perform enhanced CDD measures when dealing with PEPs, including:

• Obtaining senior management approval
• Taking reasonable measures to establish the source of wealth and funds
• Conducting ongoing monitoring

Correspondent Banking

Financial institutions should gather sufficient information about respondent institutions, assess their AML/CFT controls, obtain senior management approval for new correspondent relationships, clearly understand respective responsibilities, and conduct CDD on customers with payable-through accounts.

These recommendations aim to enhance the effectiveness of anti-money laundering (AML) and counter-terrorist financing (CFT) measures in preventing financial crimes and promoting transparency in the global financial system.