Financial Crime World

International Efforts to Combat Terrorist Financing: FATF Takes the Lead

A global threat requires a global response. In the fight against terrorist financing, international cooperation is crucial in preventing the flow of illicit funds that support terrorism. The Financial Action Task Force (FATF), an intergovernmental body created by the G-7 in 1989, plays a vital role in setting standards and monitoring national efforts to combat money laundering and terrorist financing.

The FATF’s Role

The FATF’s 40 recommendations provide a framework for countries to implement effective anti-money laundering (AML) and counter-terrorism financing (CTF) measures. Its members, including Luxembourg, must comply with these recommendations and undergo regular evaluations to ensure their AML/CTF regimes are effective.

Luxembourg’s Approach to AML/CTF

The Commission de Surveillance du Secteur Financier (CSSF), Luxembourg’s financial regulator, plays a crucial role in ensuring that financial institutions comply with AML/CTF obligations. The CSSF takes a risk-based approach to supervision, allocating resources to entities and products that pose higher risks.

Obligations of Financial Sector Professionals

Financial sector professionals, including banks, insurance companies, and securities firms, have specific obligations under Luxembourg’s AML/CTF legislation. They must:

  • Comply with customer due diligence measures, including verifying the identity of customers and beneficial owners.
  • Implement adequate internal management requirements to prevent money laundering and terrorist financing.
  • Cooperate with authorities in identifying and reporting suspicious transactions.

Customer Due Diligence Measures

Financial sector professionals must apply customer due diligence measures when:

  • Establishing a business relationship
  • Carrying out occasional transactions exceeding EUR 15,000 or more
  • Suspecting money laundering or terrorist financing
  • Doubts arise about the veracity of provided information

These measures include identifying and verifying the customer’s identity, as well as obtaining information on the purpose and intended nature of the business relationship.

Conclusion

The FATF’s efforts to combat terrorist financing have been instrumental in setting global standards for AML/CTF. Luxembourg’s approach to AML/CTF, led by the CSSF, demonstrates its commitment to preventing money laundering and terrorist financing. Financial sector professionals play a crucial role in identifying and reporting suspicious transactions, and must comply with customer due diligence measures to prevent illicit activities.

In the ongoing fight against terrorism, international cooperation is essential in disrupting the flow of illicit funds that support these criminal networks. The FATF’s work in setting standards and monitoring national efforts will continue to be crucial in combating terrorist financing worldwide.