Financial Action Task Force (FATF)

The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. It sets international standards that aim to prevent these illegal activities and the harm they cause to society.
The mandate of the FATF is to set standards and to promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and the financing of proliferation, and other related threats to the integrity of the international financial system.
As a policy-making body, the FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.
The FATF was established in 1989 and is based in Paris.

History

Establishment :Established in 1989 by the G7 to examine and develop measures to combat money laundering.
Original Membership: Included G7 countries, the European Commission, and 8 other countries.
Initial Mandate: Examine money laundering techniques, review national/international actions, and propose measures to counter money laundering.
Expansion of Mandate (2001): Extended to also cover terrorist financing after the events of 9/11.
Open-ended Mandate (2019): Earlier FATF operated under fixed-term mandates; since 2019, it functions with a permanent, open-ended mandate.

Membership

40 Members: 38 countries + 2 regional organizations (European Commission and Gulf Cooperation Council).
India became a full member in 2010.
Russia’s membership in the FATF was suspended in 2023 due to its war against Ukraine

Mandate of the Financial Action Task Force (FATF)

Objectives of FATF

Protect the global financial system and broader economy from the threats of money laundering, terrorist financing, and proliferation financing.
Strengthen international financial sector integrity and ensure safety and security of the financial system.

Functions and Tasks of FATF

Risk Identification
- Identify and analyse money laundering, terrorist financing, and related threats including the methods and trends involved
- Examine the impact of measures taken to combat misuse of the financial system.
- Support national, regional, and global risk assessments.
Standard-Setting
- Develop and refine international standards for combating money laundering and the financing of terrorism and proliferation (FATF Recommendations) to ensure they remain up-to-date and effective.
Monitoring Compliance
- Conduct mutual evaluations (peer reviews) of member countries.
- Assess compliance, effectiveness, and technical implementation of FATF standards.
- Refining the standard assessment methodology and common procedures for conducting mutual evaluations and evaluation follow-up
High-Risk Jurisdictions
- Identify and engage with high-risk, non-cooperative jurisdictions.
- Coordinate actions to protect global financial systems from threats they pose.
Implementation Support
- Promote global implementation of FATF standards through FATF-style regional bodies (FSRBs) and international organisations.
- Provide technical assistance, guidance, and training.
Global Coordination
- Responding as necessary to significant new and emerging threats and risks to the integrity of the financial system consistent with the needs identified by the international community, including the United Nations Security Council, the G20 and the FATF itself
- Preparing guidance as needed to facilitate implementation of relevant international obligations in a manner compatible with the FATF standards
Collaboration
- Assisting jurisdictions in implementing financial provisions of the United Nations Security Council resolutions on terrorism and non-proliferation, assessing the degree of implementation and the effectiveness of these measures in accordance with the FATF mutual evaluation and follow-up process, and preparing guidance as needed to facilitate implementation of relevant international obligations in a manner compatible with the FATF standards
- Maintaining engagement with other international organisations and bodies, in particular the United Nations, to increase the outreach of the activities and objectives of the FATF
Engagement with Private Sector & Civil Society
- Consult private sector and civil society for effective FATF implementation.
- Enhance transparency and dialogue for better compliance.
Flexibility in Action
- Take up additional tasks assigned by members within the FATF mandate.
- Avoid duplication of efforts with other global initiatives.

FATF Recommendations

The FATF Recommendations provide a comprehensive framework of measures to help countries tackle illicit financial flows.
The FATF Recommendations are the basis on which all countries should meet the shared objective of tackling money laundering, terrorist financing and the financing of proliferation.
These include a robust framework of laws, regulations and operational measures to ensure national authorities can take effective action to detect and disrupt financial flows that fuel crime and terrorism, and punish those responsible for illegal activity.
The 40 Recommendations are divided into seven distinct areas:
- AML/CFT Policies and coordination
- Money laundering and confiscation
- Terrorist financing and financing of proliferation
- Preventive measures
- Transparency and beneficial ownership of legal persons and arrangements
- Powers and responsibilities of competent authorities and other institutional measures
- International cooperation
The FATF Recommendations are also often referred to as the FATF Standards
FATF recommendations are non-binding guidances

What are the FATF Standards?

The FATF Standards comprise both the taskforce’s Recommendations (the global AML/CFT standards) and Methodology that assesses how effective countries AML/CFT systems are.

Governance

Internal Structures of FATF

The Plenary
The President, assisted by a Vice-President
The Steering Group
The Secretariat

The Plenary

Consists of Member jurisdictions and organisations.
Supreme decision-making body of FATF.
Decisions taken by consensus.
Key Functions
- Determines its own working procedures.
- Appoints the President, Vice-President, and Steering Group.
- Approves FATF’s work programme and budget.
- Adopts standards, guidance, and reports developed by FATF.
- Decides on membership, FSRB status, and observer status.
- Handles all matters governing the business and affairs of FATF.

President of FATF

Appointed by the Plenary from among its Members.
Serves a two-year, non-renewable term
Functions & Responsibilities
- Chairs meetings of the Plenary and Steering Group.
- Oversees the FATF Secretariat.
- Acts as the principal spokesperson of FATF and represents it externally.
- Maintains engagement with international organisations (e.g., UN, UNSC, Committees).
- Takes decisions and actions to achieve the objectives of FATF.
- Presents priorities to FATF Ministers at the start of the term.
- Provides annual reports and updates on FATF’s key work.
- Owes full responsibility to FATF, independent of other authorities or institutions.

Steering Group

Advisory body of FATF, chaired by the President.
The composition of the Steering Group is decided by the Plenary at the proposal of the President in a manner that ensures maximum effectiveness in taking forward the FATF’s work while having regard to balanced representation in terms of geographic regions and considering the diversity in terms of size of the Member’s economy, level of participation in FATF and FSRBs, and relevant international engagement.
Composition reviewed on a biennial basis.
Responsibilities
- Advises the President between Plenary Meetings.

Key duties:
- Monitoring and guiding FATF’s ongoing work.
- Promoting coordination across working groups.
- Ensuring effective information flow to all Members.
- Taking forward any work necessary to fulfil FATF’s mandate (in consultation with Plenary).

Secretariat

The FATF Secretariat is composed of an Executive Secretary, whom the Plenary appoints at the proposal of the President, and the Secretariat staff.
The main responsibilities of the Secretariat include the following:
- Supporting the activities of the FATF, including its working groups;
- Facilitating co-operation between Members, Associate Members and observers;
- Ensuring efficient communication to Members and others;
- Helping to ensure the quality of mutual evaluations reports and consistency in applying the FATF Recommendations across the Global Network, including by participating in relevant FSRBs meetings;
- Managing the financial, material and human resources allocated to the FATF;
- Maintaining the records, administering internal and external websites and dealing with correspondence of the FATF
- Carrying out all other functions assigned to it by the President or the Plenary.
The Secretariat service is provided by the OECD, and the Secretariat is located at the OECD Headquarters in Paris.

FATF Lists

Black List: Countries with severe deficiencies in anti-money laundering and counter-terror financing (AML/CFT) regimes.
- For all countries identified as high-risk, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence, and in the most serious cases, countries are called upon to apply counter-measures to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing risks emanating from the country.
- Currently: North Korea, Myanmar and Iran.
Grey List: Countries under “increased monitoring” due to strategic deficiencies in AML/CFT frameworks.
- When the FATF places a jurisdiction under increased monitoring, it means the country has committed to swiftly resolve the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring.

FAQs

Q1. What is the Financial Action Task Force (FATF)?

FATF is an international watchdog that sets global standards to combat money laundering, terrorist financing, and proliferation financing.

Q2. When and why was FATF established?

FATF was established in 1989 by the G7 to combat money laundering. After 9/11, its mandate expanded to cover terrorist financing, and since 2019, it has an open-ended mandate.

Q3. Where is FATF headquartered?

FATF is based in Paris, France, and its Secretariat is housed at the OECD Headquarters.

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