FATF Updates Its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Methodology
The Financial Action Task Force (FATF) has made several revisions to its AML/CFT methodology, aimed at strengthening the global fight against money laundering and terrorist financing. The updates are designed to ensure consistency and clarity in assessing the effectiveness of countries’ anti-money laundering and combating the financing of terrorism regimes.
February 2017: Alignment with Revised Interpretive Note
The FATF revised Recommendations R.5 and IO.9 to align them with the updated Interpretive Note and Glossary term “funds or other assets.” This change aims to provide a more comprehensive understanding of the scope of these recommendations.
November 2017: Amendments to Recommendation 7
The FATF revised Recommendation R.7 to reflect changes made in June 2017 to the UN Security Council Resolutions on proliferation financing. These updates ensure that countries’ AML/CFT regimes are aligned with international standards and effective in preventing the misuse of financial systems.
November 2017: Footnote Addition to Recommendation 25
A footnote was added to Recommendation R.25 to provide guidance on identifying other legal arrangements that may be vulnerable to money laundering and terrorist financing. This update aims to ensure a consistent approach across mutual evaluations.
February 2018: Revisions to Recommendations 18 and 21
The FATF revised Recommendations R.18 and R.21 to clarify the requirements for sharing information related to unusual or suspicious transactions within financial groups. These updates aim to prevent tipping-off and ensure that countries’ AML/CFT regimes are effective.
October 2018: Revisions to Recommendation 2 and Immediate Outcome 1
The FATF revised Recommendations R.2 and IO.1 to clarify the need for compatibility between AML/CFT requirements and data protection and privacy rules. These updates aim to ensure that countries’ AML/CFT regimes are effective while also respecting individuals’ rights.
October 2018: Clarification of Immediate Outcomes 3 and 4
The FATF added footnotes to clarify the expectations when assessing effectiveness under IO.3 and IO.4, taking into account the risk, context, and materiality of the country being assessed.
February 2019: Revisions to Immediate Outcomes 3 and 4
Additional notes were provided for assessors and footnotes were added to provide guidance on assessing the relative importance of different sectors of financial institutions and designated non-financial businesses and professions (DNFBPs).
October 2019: Revisions to Recommendation 15 and Immediate Outcomes 1-4, 6-11
The FATF revised Recommendations R.15, IO.1-IO.4, and IO.6-IO.11 to incorporate virtual assets and virtual asset service providers into the AML/CFT framework. This update aims to ensure that countries’ AML/CFT regimes are effective in addressing the risks associated with these emerging technologies.
November 2020: Clarification to Recommendation 17
A footnote was added to clarify that Recommendation R.17 does not apply to third-party outsourcing and agency relationships, as noted in Interpretive Note R.17.
October 2021- June 2023: Further Revisions
The FATF made additional revisions to its methodology, including clarifying the requirements of criterion 36.2 and revising the Glossary definition of “designated categories of offences” to include environmental crime.
These updates demonstrate the FATF’s commitment to ensuring that countries’ AML/CFT regimes are effective in preventing money laundering and terrorist financing while also respecting individuals’ rights. The revisions aim to provide clarity, consistency, and guidance for countries as they implement and assess their AML/CFT frameworks.