But what is the remit of FATF in financial crime? Let’s break it down:
The Financial Action Task Force (FATF) is an international organisation that sets standards and promotes the effective implementation of measures to
combat money laundering, terrorist financing, and other related threats to the integrity of the international financial system. They create the rules to keep the bad guys from using our financial systems for their dirty work.
Why Is FATF Important?
Financial crime is a huge problem globally. According to some estimates, money laundering transactions make up roughly
2-5% of the global GDP, which translates to billions of dollars annually. Yikes!
That’s where FATF comes in.
By setting standards and conducting evaluations, FATF helps countries strengthen their financial systems against abuse.
Examples of FATF’s Work
One of the tools FATF uses is the “
grey list”, a list of countries that have deficiencies in their anti-money laundering (AML) and counter-terrorist financing (CTF) regimes but have committed to addressing them.
Being on this list isn’t great—it can lead to a lot of pressure on a country's economy. An example is Pakistan, which was placed on the grey list and faced various economic challenges as a result.
Football, the beautiful game, has not been immune to financial crime. FATF’s guidelines help prevent money laundering in sports too. For instance, the case of
money laundering in football clubs highlights how criminals have used club transactions to launder money. Investigations revealed that shady deals in player transfers were used to clean dirty money.
Other Key Players in Financial Crime Compliance
FATF isn’t alone in this battle. There are other important organisations you should know about:
OFAC (Office of Foreign Assets Control)
OFAC, which is a part of the U.S. Department of the Treasury, is responsible for administering and
enforcing economic and trade sanctions based on U.S. foreign policy and national security goals. They target threats such as terrorism, narcotics trafficking, and the proliferation of weapons of mass destruction. OFAC’s sanctions list is something every financial institution must check to ensure they’re not doing business with bad actors.
OCC (Office of the Comptroller of the Currency)
The OCC is an independent bureau within the U.S. Department of the Treasury. They have the responsibility to charter, regulate, and supervise all national banks and federal savings associations. They ensure that these institutions operate safely and soundly, provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations, including those related to financial crime.
BIS (Bureau of Industry and Security)
BIS, part of the U.S. Department of Commerce, controls the export of sensitive goods and technologies to protect U.S. national security and advance foreign policy objectives. They enforce regulations that prevent the proliferation of weapons of mass destruction, restrict exports to rogue states and terrorist organisations, and ensure compliance with anti-money laundering measures.
How Does FATF Affect You?
If you’re in the finance world, you’re likely already feeling the impact of FATF’s regulations. They influence everything from how banks operate to the due diligence processes companies must follow. For finance professionals, understanding FATF guidelines is crucial for compliance and helping your organisation avoid penalties.
Remember, staying informed and compliant not only protects your organisation but also contributes to a safer global financial system.
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Let's keep those bad guys out of our banks!
FAQ
What is AML in financial crime?
AML, or Anti-Money Laundering, refers to the measures, laws, and regulations implemented to prevent criminals from disguising illegally obtained funds as legitimate income. AML procedures involve monitoring financial transactions, reporting suspicious activity, and ensuring compliance with legal standards to combat money laundering, terrorist financing, and other financial crimes. Organisations like the Financial Action Task Force (FATF) set guidelines for AML practices globally, helping to maintain the integrity of financial systems and prevent illicit activities.