Combating Money Laundering and Terrorist Financing: FATF Recommendations

Introduction

The Financial Action Task Force (FATF) is an inter-governmental organization that develops and promotes policies to protect the global financial system against money laundering, terrorist financing, and proliferation financing. The following recommendations outline key measures for Financial Institutions (FIs) to prevent and detect Money Laundering (ML) and Terrorist Financing (TF).

Customer Due Diligence (CDD)

• Conduct CDD on new customers: FIs should conduct CDD on all new customers.
• Risk-based approach: Where necessary, FIs should conduct CDD on existing relationships using a risk-based approach.
• Identify and verify customers: FIs should identify customers and verify their identities using reliable sources of information.

Beneficial Ownership

• Identify beneficial owners: FIs should identify beneficial owners (e.g., individuals who own or control a customer).
• Verify beneficial ownership: Verify the identities of beneficial owners to ensure they understand the ownership structure of the customer.

Purpose of Business Relationship

• Understand business relationship: FIs should understand the purpose of the business relationship, including any transactions that will be conducted.

Ongoing Due Diligence

• Conduct ongoing due diligence: FIs should conduct ongoing due diligence on customers to ensure that their transactions are consistent with their risk profile.

Record Keeping

• Maintain records for five years: Financial Institutions should maintain records on transactions and information obtained through CDD measures for at least five years.
• Availability of records: The CDD information and transaction records should be available to competent authorities upon request.