Financial Crime World

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Evolution of Financial Action Task Force (FATF) Standards

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The Financial Action Task Force (FATF) Standards provide guidance on combating money laundering and terrorist financing. Between 2017 and 2023, revisions were made to strengthen the effectiveness of Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) measures.

Key Revisions and Updates

June 2017: Amendments to FATF Standards

  • The International Narcotics Control Board (INR.7) and Glossary amendments reflect changes to UN Security Council Resolutions on proliferation financing.
  • These updates ensure that the FATF Standards are aligned with international efforts to combat proliferation financing.

November 2017: Revisions to Recommendation 25

  • Clarified guidance on identifying other legal arrangements vulnerable to money laundering and terrorist financing.
  • This revision helps financial institutions identify potential risks and take proactive measures to prevent illicit activities.

February 2018: Amendments to Recommendations 18 and 21

  • Clarified requirements for sharing information related to unusual or suspicious transactions within financial groups.
  • These revisions emphasize the importance of cooperation between financial institutions in identifying and reporting suspicious activities.

October 2018: Revisions to Recommendation 2 and Immediate Outcome 1

  • Clarified the need for compatibility between AML/CFT requirements and data protection rules.
  • This revision ensures that financial institutions balance their obligations under FATF Standards with their data protection responsibilities.

February 2019: Revisions to Immediate Outcomes 3 and 4

  • Provided further guidance on assessing the relative importance of different sectors of financial institutions and designated non-financial businesses and professions (DNFBPs).
  • These revisions help regulatory bodies assess the risks associated with various sectors and make informed decisions.

October 2019: Incorporation of Virtual Assets and Virtual Asset Service Providers

  • Revisions to Recommendation 15 and Immediate Outcomes 1-4, and 6-11 incorporate virtual assets and virtual asset service providers.
  • This revision recognizes the growing importance of virtual assets in the global economy and aims to prevent their misuse for illicit activities.

November 2020: Clarification to Recommendation 17

  • Clarified that Recommendation 17 does not apply to third-party outsourcing and agency relationships.
  • This clarification ensures that financial institutions understand their obligations under FATF Standards when engaging with third-party service providers.

October 2021: Revision of Glossary Definition

  • Revised the Glossary definition of ‘designated categories of offences’ to clarify the types of offences which fall within the ’environmental crime’ category.
  • This revision helps regulatory bodies accurately identify and assess environmental crimes under FATF Standards.

June 2023: Addition of Footnote Clarifying Distinction Between FATF and UNODC IRM Assessments

  • Added a footnote to clarify the distinction between FATF and UNODC IRM assessments.
  • This clarification ensures that regulatory bodies understand the differences between these two assessment frameworks and can make informed decisions.

These revisions aim to strengthen the effectiveness of AML/CFT measures, enhance transparency, and prevent abuse in various sectors. By updating the FATF Standards, regulatory bodies can better combat money laundering and terrorist financing, ultimately promoting a safer and more secure global economy.