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FATF Effectiveness Report

Last week, the Financial Action Task Force (FATF) released its Report on the State of Effectiveness and Compliance with the FATF Standards, the first public report of its kind from the global AML watchdog. The report, which aims to give a comprehensive overview of the state of global efforts to tackle money laundering, terrorist and proliferation financing, is based on data from FATF mutual evaluation reports since 2013, which assessed the strengths and weaknesses of a jurisdiction’s AML/CFT frameworks. According to reports, “despite the growth in satisfactorily compliant jurisdictions in the past 10 years, the FATF report distinguishes between “technical” compliance and “effectiveness.” [And] while 76% of countries are technically compliant, effectiveness sits at just 21%, indicating there is much more work to be done.”

Notably, FATF stated that nearly all (97%) of 120 assessed jurisdictions have low to moderate effectiveness ratings for preventing money laundering and terrorist financing in the private sector. As a result, the global watchdog indicated that the next round of mutual evaluations will place an even greater focus on effectiveness and “to ensure that countries are implementing and making use of the laws, regulations and policies that are being passed.” According to the report, going forward, the assessors are “being explicitly told to ‘focus on the areas where the risks are highest, not just lower-risk areas where it is comparatively easier to launch investigations and secure convictions’.” Furthermore, the group says that the aforementioned report fed into the FATF’s Strategic Review, which aims to make the next cycle of FATF assessments “more timely, risk-based and effective,” with a significantly shorter evaluation cycle so that jurisdictions get assessed more frequently. Crucially though, the global watchdog stated that “many countries continue to adopt laws and regulations in a ‘tick box’ approach, which makes it difficult for countries to take effective measures to tackle the specific illicit finance risks they face.” And with much more work to be done, it’s high time to move beyond the ‘tick box’ approach to compliance that undermines the effectiveness of efforts to combat illicit finance.

AML Compliance Regulations Risk Management
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