Financial Crime World

Combating Money Laundering and the Financing of Terrorism & Proliferation

The Financial Action Task Force (FATF) is an inter-governmental organization dedicated to protecting the global financial system against money laundering, terrorist financing, and proliferation financing. The following recommendations outline key measures to prevent these illicit activities.

Key Recommendations

Customer Due Diligence (CDD)

  • Risk-Based Approach: Financial institutions should apply CDD measures using a risk-based approach (RBA) to all new customers, as well as to existing customers on the basis of materiality and risk.
  • Customer Verification: Customers and beneficial owners should be verified before or during the course of establishing a business relationship.

Risk Management

  • Politically Exposed Persons (PEPs): Financial institutions should have appropriate risk-management systems in place to determine whether a customer is a PEP and take enhanced measures if necessary.
  • Senior Management Approval: Financial institutions should obtain senior management approval when dealing with PEPs.
  • Enhanced Ongoing Monitoring: Financial institutions should conduct enhanced ongoing monitoring of PEPs.

Record-Keeping

  • Transaction Records: Financial institutions should maintain records on transactions, including domestic and international transactions, for at least five years to enable swift compliance with information requests from competent authorities.

Additional Measures for Specific Customers and Activities

  • Correspondent Banking:
    • Gather sufficient information about respondent institutions to understand their business nature and reputation.
  • Politically Exposed Persons (PEPs): Financial institutions should take additional measures when dealing with PEPs, including obtaining senior management approval and conducting enhanced ongoing monitoring.

Objective

These recommendations aim to prevent money laundering, terrorist financing, and proliferation financing by ensuring that financial institutions conduct due diligence on customers, maintain accurate records, and implement risk-management systems.