Financial Action Task Force Publishes Report on Effectiveness of FATF Standards

The Financial Action Task Force has published a report on the effectiveness of FATF member states' efforts to tackle money laundering and counter terrorism financing. The report is part of the FATF's 2019 Strategic Review which aims to improve the FATF's processes to make FATF mutual evaluations more effective. Mutual evaluations assess the extent to which FATF member countries have implemented the FATF's 40 Recommendations.

The Report finds that there has been huge progress in countries' compliance with FATF standards, with 76% of countries now having satisfactorily implemented the 40 Recommendations (up from just 36% in 2012). However, there are still significant challenges. The report focussed on key areas, including: countries' understanding of AML/CTF risks; the private and public sectors' prevention of money laundering and terrorism financing and countries' supervision of AML/CTF measures; countries' systems for monitoring and enforcing beneficial ownership and transparency; and criminal justice systems for money laundering and terrorist financing and the use of international co-operation to combat such activities. Particular challenges included the lack of ML/TF risk awareness amongst the non-financial sector, a lack of effective regimes to promote transparency in beneficial ownership of companies and investigation and prosecution of ML/TF offences.

The report has informed a series of changes that will be implemented in the FATF's fifth round of mutual assessments, including a shorter evaluation cycle so that countries are assessed more regularly, greater focus on the major risk areas and a results-orientated follow-up assessment process. The FATF has also published notes on the FATF's Methodology for assessing compliance with the FATF Recommendations and effectiveness of AML/CTF systems and the FATF Procedures for AML/CTF mutual evaluations, as well as a 5th Round Revised Methodology providing information on the FATF's fifth round of mutual evaluations. The notes and Revised Methodology will come into effect when the FATF commences the fifth round and may be subject to change prior to that date.

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