FATF - you need to know this about money

The Financial Action Task Force (FATF) is the organization that sets global recommendations regarding the fight against money laundering and the use of money by organized crime and terrorists.

A quick history of the FATF

Money laundering has always been a problem, but with the increase of international trade after WWII, the problem got worse. In response, countries such as the United States developed national legislation like the Bank Secrets Act to try to rein it in.

It became obvious that international cooperation was required. To that end, the G7 met in Paris in 1989 to found the Financial Action Task Force, or FATF. The founders envisioned FATF as a body that would keep tabs on how money was being laundered as well as government steps to counter that, report on compliance, and draft standards against money laundering.
Over time, FATF grew from 16 members to 40. Standard were issued, then revised as the organization’s mandate was expanded to cover terrorism in the wake of the September 11, 2001 attacks in the United States.

FATF Black List and Grey List

FATF has a list of 40 recommendations for countries, ranging from providing law enforcement officers with information, AML/KYC, and especially beneficial owner information. There are nine more that relate to terrorism.
While these recommendations usually do not make the news, there are two lists, black and grey, that can make headlines. The black list is one of “High Risk” jurisdictions that are essentially un-cooperative with FATF, such as North Korea. The grey list of "Jurisdictions Under Increased Monitoring” includes countries that have inadequate controls in place. All transactions with counterparties there are subject to added scrutiny.
Countries on the Black List are largely outside of the world financial system. Grey List countries, however, are connected, and will often work (over years) to be removed from it.

Complaints about FATF

FATF operates on consensus, and as such, any country that votes against the measure at hand can scuttle a proposal. This weakness has been exploited in the past, as former FATF head Dvid Lewis has publicly stated. Other complaints include a glacial pace because of the bureaucratic nature of the place, and thus an inability to keep up with the pace of technology.

FATF on the Russian war on Ukraine

One area in which FATF has moved with some speed is in terms of the Russian invasion of Ukraine. The situation is unusual in that the organization insists that the Russian Federation is still accountable for its obligation to implement the FATF Standards. However, its membership has been suspended.