Why Countries join the Financial Action Task Force (“FATF”)?
FATF is an inter-government body; an organisation opens to all countries who wish to participate in the fight against money laundering and terrorist financing. Majority of countries joined the FATF are members of the United Nations. See Chapter 2, First Edition, Money Laundering – A Handbook for CDD Compliance.
Which are the Authorities binds FATF?
FATF develops standards or FATF Recommendations from resolutions passed and adopted by the United Nations General Assembly and the United Nations Security Council. See Chapter 2, First Edition, Money Laundering – A Handbook for CDD Compliance. See also Diagram 4, FATF 40 Recommendations Diagram.
What must FATF Members do and how?
FATF Members must follow and adopt the FATF Recommendations in their home country by making, incorporating and approving relevant anti-money laundering legislation at Parliament or Legislative Council to become domestic law or regulation for Anti-Money Laundering and Countering the Financing of Terrorism (“AML/CFT”). See Chapter 2, First Edition, Money Laundering – A Handbook for CDD Compliance. See also Diagram 6, Assessment Methodology Flow Chart.
How FATF assess the AML/CFT System of a FATF Member?
In FATF language, FATF carries out the Mutual Evaluation assessment on each FATF Member. From the Mutual Evaluation assessment, FATF will know whether the AML/CFT system of that FATF Member is effective and efficient or otherwise ineffective and inefficient. FATF provides a Mutual Evaluation Report to the FATF Member after each Mutual Evaluation completed. See Chapter 3, First Edition, Money Laundering – A Handbook for CDD Compliance. See also Diagram 8, FATF-APG Relationship on Mutual Evaluation Diagram.
What assessment technique FATF adopts?
In FATF language, FATF called it the Risk-Based Approach (“RBA”) and the application of the RBA approach is mandatory under FATF Recommendation 1. See Chapter 2.12, FATF Recommendations and Chapter 10.3, Risk-Based Approach and MER Comparison, First Edition, Money Laundering – A Handbook for CDD Compliance. See also Diagram 27, The RBA application Diagram.
How FATF signals the FATF Member’s AML/CFT System?
In the Mutual Evaluation Report, FATF will highlight the status of the FATF Member’s AML/CFT System by using a “weighting” comment against each assessed FATF Recommendation with a set of criteria for assessment. Finally, FATF will provide an overall rating called The Technical Compliance Ratings which has five levels of compliance. Compliant, Largely Complaint, Partially Complaint, Non-Complaint, and Not Applicable. See Chapter 2.14, Assessment Methodology, First Edition, Money Laundering – A Handbook for CDD Compliance. See also Diagram 5, Technical Compliance Ratings Chart.
Why is a Non-Complaint (“NC”) Rating a weak sign?
An NC rating means the FATF Member failed to comply either ignoring the compliance request or have not done to ratify, improve or fulfil the compliance request. In Chapter 10.3, First Edition, Money Laundering – A Handbook for CDD Compliance, MER Comparison for Taiwan and Korea discussed and revealed Taiwan has NC for SR.I, SR.II, SR.III and SR.IV of the Nine Special Recommendations. The NC rating puts Taiwan under the “high-risk countries” group. The meaning here is that the country AML/CFT System for Taiwan is in jeopardy. See Diagram 28, MER Comparison Chart for Taiwan and Korea.
What will happen FATF Member failed to remove the NC Rating?
FATF can black list a FATF Member. FATF also has a right to remove the default FATF Member from the FATF Membership List. The failure to remove the NC rating is tantamount to mean to encourage money laundering, the spirit of AML/CFT failed.
See Chapter 2.3, Functions of FATF, First Edition, Money Laundering – A Handbook for CDD Compliance.
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Categories: UNODC, UNCAC, FATF, AML/CFT, Compliance
