AML-CFT Standards—Scope and Coverage
In 1990, the FATF issued a report containing a set of 40 recommendations, which provided a comprehensive plan of action needed to fight against money laundering. Since then, the recommendations have been revised twice, most recently in October 2004 (FATF
2004b) and have been recognized widely as an international standard in this area. The recommendations cover (a) all the measures that national AML regimes should have in place within their legal, criminal justice, and regulatory systems; (b) the preventive measures to be taken by financial institutions and certain other businesses and professions; and (c) international cooperation. The FATF recommendations now apply not only to money laundering but also to terrorist financing. The eight “Special Recommendations on Terrorist Financing” (FATF 2004c), which were adopted in 2001 and most recently updated in October 2004, address ratification and implementation of UN resolutions, criminalization of the financing of terrorism, efforts to freeze and confiscate terrorist assets, reports of suspicious transactions, international cooperation, alternative remittances, wire transfers, nonprofit organizations, and cash couriers. Taken together, the 40 recommendations and the 9 special recommendations provide a comprehensive framework of measures for combating money laundering and terrorist financing.
An effective AML-CFT system requires an adequate legal and institutional framework and law enforcement mechanisms, as outlined in the FATF recommendations. The AML-CFT system should include (a) laws that create money laundering and terrorist financing offenses and that provide for freezing, seizing, and confiscating the proceeds of crime and terrorist funding; (b) laws, regulations, or, in certain circumstances, other enforceable means that impose the required obligations on financial institutions and on designated nonfinancial businesses and professions; (c) an appropriate institutional or administrative framework and effective laws that provide competent authorities with the necessary duties, powers, and sanctions; and (d) laws and other measures that give a country the ability to provide the widest range of international cooperation. It is also essential that the competent authorities ensure that the whole system is effectively implemented. Specific FATF recommendations spelling out the above framework in greater detail are listed in Annex 8.A.