FATF Recommendations

States have various legal and administrative systems to frame measures aimed at combating money laundering, resulting in different actions and processes to address these situations. This is why the FATF Recommendations — Financial Action Task Force — set international standards that states must implement and comply with, adapting them to their respective circumstances.

In 1990, a year after the FATF was conceptualized, the FATF issued the first 40 Recommendations aimed at combating money laundering, which underwent extensive revision in 1996. Later in 2001, following the 9/11 attacks, 9 additional Recommendations were published, focusing on countering terrorist financing. It wasn’t until 2012 that all of these FATF publications were consolidated into a single document, creating the 40 FATF Recommendations that we know today.

Currently, more than 180 countries apply the FATF Recommendations within their states. These have helped promote significant legislative initiatives, such as the European Union’s Anti-Money Laundering Directives, and have fostered intergovernmental cooperation.

Structure of the 40 FATF Recommendations

The 40 Recommendations are structured into seven groups:

1. Policy Coordination
2. Money Laundering Offense
3. Terrorist Financing and Proliferation of Weapons
4. Preventive Measures
5. Transparency and Beneficial Ownership of Legal Persons
6. Powers and Responsibilities of Competent Authorities
7. International Cooperation

Policy Coordination

This group includes Recommendations 1 and 2. The first addresses the need for countries to consider active risks in their states. They must apply a risk-based approach to ensure that the measures adopted are proportionate to the risks identified.

The second recommendation mandates the establishment of national policies for coordination and cooperation among the various public actors involved in combating this scourge.

Money Laundering Offense

Recommendations 3 and 4 are included in this group. These emphasize the crucial need to criminally prosecute money laundering and establish measures for the confiscation, seizure, or freezing of these assets.

Terrorist Financing and Proliferation of Weapons

This group includes Recommendations 5 through 8. The objective of these Recommendations is to combat terrorist financing as well as the financing of weapons proliferation. Among the Recommendations is the need to criminally prosecute terrorist financing based on the International Convention for the Suppression of the Financing of Terrorism.

Additionally, there are Recommendations to implement international sanctions related to terrorism, as well as to weapons proliferation. Furthermore, a Recommendation imposes the need to review regulations governing non-profit organizations.

Preventive Measures

This is the largest group of Recommendations, covering Recommendations 9 to 23. These include most of the preventive measures we have today. For example, Recommendation 10 outlines due diligence measures, which establish requirements for customer identification when initiating a business relationship.

This group also includes the requirement we now call “document retention,” in which obligated entities must retain the information obtained from their clients. This large group also discusses politically exposed persons, the risks associated with correspondent banking, and high-risk jurisdictions, as well as the risks that new technologies, such as cryptocurrencies, can bring.

Transparency and Beneficial Ownership of Legal Persons

This group, which includes Recommendations 24 and 25, mandates that states take measures to facilitate the identification of the beneficial ownership of legal persons. This is intended to provide a clear understanding of the real structure of these entities, to prevent them from being used for money laundering.

Powers and Responsibilities of Competent Authorities

Recommendations 26 to 35 fall under this group. These address the various responsibilities and authorities that supervisory bodies must have in preventing money laundering. These include the regulation and supervision of financial entities, the establishment of Financial Intelligence Units, investigative responsibilities, among others.

International Cooperation

Lastly, the group “International Cooperation” covers the remaining Recommendations, from 36 to 40. This section outlines various international cooperation mechanisms, such as the need to ratify international instruments, as well as legal assistance in seizures, asset freezes, and extraditions.