Financial Action Task Force (FATF)

An intergovernmental organization that designs and promotes policies and standards to combat money laundering. Recommendations created by the Financial Action Task Force (FATF) target money laundering, terrorist financing, and other threats to the global financial system. The FATF was created in 1989 at the behest of the G7, and is headquartered In Paris.

BREAKING DOWN 'Financial Action Task Force (FATF)'

The rise of the global economy and international trade has increased both the wealth that ordinary citizens can acquire through commerce and the pressures countries face when it comes to fighting money laundering and other financial crimes. The Financial Action Task Force creates universally-applicable recommendations that are designed to ensure that all countries participating are treated equally. The organization monitors how its members implement the guidelines from each recommendation, reviews each member’s policies and procedures for combating money laundering and financial crime, and seeks to increase acceptance of anti-money laundering regulations across the globe. Because money launderers change techniques over time, the FATF has to update its recommendations every couple of years.

As of 2014 there are thirty-six members of the Financial Action Task Force. Most members are countries, though regional organizations, such as the European Commission, are also included. In order to become a member a country must be considered strategically important (large population, large GNP, developed banking and insurance sector, etc.), must adhere to globally accepted financial standards, and be a participant in other important international organizations. Once a member, a country or organization must endorse and support the most recent FATF recommendations, commit to being evaluated by (and evaluating) other members, and work with the FATF in the development of future recommendations.

A large number of international organizations participate in the FATF as observers, each of which has some involvement in anti-money laundering activities. Organizations such as Interpol, the International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD), and World Bank are observers.