VIDEO: Who is FATF?
In this Compliance Clip (video), Adam talks about the the Financial Action Task Force or FATF, an international organization established to set global standards for combating money laundering and terrorist financing. He explains the FATF's role in coordinating efforts among nations and the importance of their 40 recommendations in maintaining financial integrity worldwide.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to talk about the organization FATF. So this is a BSA/AML topic.
In our world of BSA/AML, we have a lot of acronyms. And so I want to talk about the organization FATF.
Frst of all, it's important to understand that in the United States, the organization that governs BSA/AML/CFT, which of course stands for the Bank Secrecy Act, Anti-Money Laundering, and Combating the Financing of Terrorism. But in the U.S., the agency that governs that for financial institutions is, of course, FinCEN. FinCEN is the short version to say the Financial Crimes Enforcement Network. Now, this is an organization that was enacted by Congress and is a bureau within the U.S. Department of the Treasury. They oversee combating of money laundering and combating of the financing of terrorism in financial institutions in the United States.
FATF, on the other hand, which is an acronym, of course, and is pronounced FAT-F according to them, not FATFA, which is the way I would prefer to pronounce it if it were up to me, but it's not, so we'll call them FAT-F. What FATF is short for the Financial Action Task Force. And this is not a U.S. agency, organization, or government unit. This is an international organization that was founded by a G7 initiative in 1989 in Paris. So this is an international group of nations who've come together who essentially set standards for all countries to play by the same rules globally as it relates to the financial system. The idea is that if some countries aren't playing at the same level, there could be gaps in the global financial economy. Therefore, FATF is sort of that overseer of all countries throughout the world.
Currently they have about 40 members and nations and cover more than about 200 countries and jurisdictions, according to their website. In their words, they are “a global money laundering and terrorist financing watchdog.” So they're helping to oversee this, not just on an individual nation basis, but on a worldwide basis. That's really the idea behind this organization.
What FATF does is they set standards for countries, and most countries adopt these in one way or another, but they set standards to help combat money laundering, terrorist financing, and other related threats. Traditionally, back in 1989 through the 90s, it was just a focus on money laundering. Then in the early 2000s, they added the combating of terrorist financing to their parties. And so, that is FATF.
Now, in order to implement their goals, they release a list of recommendations. You may have heard of the FATF recommendations, and currently they have a list of 40 recommendations that are used to test the practices of countries to identify money laundering and terrorist financing weaknesses. These recommendations include standards for things like non-profit organizations or NPOs, customer due diligence, record-keeping requirements as it relates to BSA/AML/CFT, PEPs, which are, of course, politically exposed persons, wire transfers, reporting of suspicious transactions, beneficial owner requirements, and pretty much anything and everything related to BSA, AML, or CFT in the United States.
So, lot of what we have in the United States is not unique worldwide. Most countries have requirements for suspicious activity identification, and reporting. Most countries have standards for identifying large currency transactions and reporting those large currency transactions. And so, in the United States, of course, our law is the Bank Secrecy Act, but each country has their own set of laws and practices in place that align with the same things that we have in the United States under our BSA/AML rules. And, of course, a lot of this goes back to the Financial Action Task Force who's setting these recommendations for all countries worldwide. And if countries are not following, they end up on a blacklist or a graylist, depending on the severity of their violations.
That's essentially how that works, and that is who FATF is.
That's all I have for this Compliance Clip.