FATF is the Financial Action Task Force, an inter-governmental body established in Paris in 1989 by the Group of 7 (G7). It seeks to combat money laundering, terrorist financing and other threats to the international financial system. It is both a policy-making and enforcement body.
The Task Force was initially set up to tackle the drug problem and the money laundering and misuse of financial institutions resulting thereof. In April 1990, the FATF set out 40 detailed Recommendations on ways to counter this threat. After 9/11, a further 8 Special Recommendations were added, after the FATF’s mandate was enlarged to include the fight against terrorist financing. In 2004, a 9th Recommendation was added.
The FATF Recommendations essentially mandate that states, in order to maintain the integrity of their financial systems, should:
- identify the risks, and develop policies and domestic coordination;
- pursue money laundering, terrorist financing and the financing of proliferation;
- apply preventive measures for the financial sector and other designated sectors;
- establish powers and responsibilities for the competent authorities (e.g., investigative, law enforcement and supervisory authorities) and other institutional measures;
- enhance the transparency and availability of beneficial ownership information of legal persons and arrangements; and
- facilitate international cooperation.
(International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation: The FATF Recommendations. Paris: FATF/OECD, 2013. p.7.)
The FATF has 38 members, including two regional organisations (the Gulf Cooperation Council and the European Commission). Additionally, it has 9 associate members, tasked with enforcing its mandate on a regional basis. More than 20 bodies have observer status (among them, the IMF, World Bank, OECD and various UN law-enforcement bodies).