Editorial: When the FATF comes calling
| Date | 14 August 2024 |
| Pages | 805-807 |
| DOI | https://doi.org/10.1108/JMLC-10-2024-207 |
| Published date | 14 August 2024 |
| Author | Peter German |
Editorial: When the FATF
comes calling
At its 1989 meeting, the G7 Heads of Government established the Financial Action Task
Force (FATF), intendedto dampen the growing threat posed by money laundering. Asa task
force, it was intended to be a temporary measure, but like so many initiatives, it acquired a
life of its own. Its permanence wasguaranteed when, in the aftermath of the horrific attacks
in the USA on September 11, 2001, the G8 choose to add terrorist financing to its mandate.
Today, the FATF remains the only internationalbody dedicated to this bifurcated role.
The FATF expanded over the years, to include additional nations and to create nine
regional bodies, composed of associateFATF members,which have become the lifeblood of
the task force. In total, over 200 nations are affiliated to the FATF. In April 1990, the FATF
issued Forty Recommendations, intended to serve as minimum international standards [1].
These became synonymous with the FATF, later increased by Special Recommendations
dealing with the financing of terror. Collectively, they serve as the normative international
standards expected of countries when dealing with the scourge of money laundering and
terrorist financing[2].
Adherence to the FATF’s Recommendations is voluntary, not directory. Nevertheless, to
encourage compliance, the FATF adopteda peer review mechanism, akin to that used by the
OECD for its Anti-Bribery Convention [3]. Mostpeer reviews are now conducted under
the auspices of a regionalbody. There are two aspects to a review, technical compliance with
the requirements of the Recommendations and an effectiveness assessment. Technical
compliance requires that the necessary laws be in place. Effectiveness speaks to these laws
having their intended effect,through education, compliance and enforcement.
In its early years, the FATF resorted to a “name and shame”policy to force nations into
compliance. Originally, this took the form of a list of Non-Cooperative Countries and
Territories (NCCTs). At one time or another, this list included Egypt, Israel, Nigeria,
Philippines and Russia, among others. Over time, countries fell into line and were removed
from the list. It evolved into one composed almost entirelyof small island nations. The FATF
received withering criticismfor what was perceived to be a ganging up against less fortunate
nations, thereby placing them atan economic disadvantage to theirmore advantaged
colleagues. In October 2006, all nations weredelisted. In place of the NCCT, the FATF now
has both a black list of high-risk countries and a grey list of countries that require increased
monitoring.
Being named and shamed by inclusion on either the grey or black list, is a worst-case
scenario for a country, however criticism by the FATF short of shaming can also have
considerable impact. Nations, like people, hate being singled out of the pack for criticism.
Easier to go with the flow,do what must be done, than suffer the ignominy of criticism which
may impact a country in many ways,not the least, economically. The FATF developeda
coding system to signify the degree to which a nation adheres to the Recommendations:
compliant, largelycompliant, partially compliant and not compliant.
In early peer reviews, goodmarks were accorded to countries which created the necessary
legal and enforcement frameworks to deal with money laundering and terrorist financing.
Today, peer reviews look past the bald statute to ascertain whether the laws are being
enforced, is improvement beingmade and is a country truly committed to dealing with these
crimes. The schedule of peer reviews can be maddeningly slow, extending for years between
Journal of Money
Laundering
Control
805
Journalof Money Laundering
Control
Vol.27 No. 5, 2024
pp. 805-807
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-10-2024-207
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