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FATF and MONEYVAL
The soft law approach
The FATF
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Financial Action Task Force on Money Laundering
Founded in 1989
36 Members (e.g. USA, 15-pre enlargement EU Member States, The european
Commission, China, Japan, Switzerland, Russia)
Mandate to combat money laundering (mandate expanded to incorporate terrorist
financing)
Aims:
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set standards and promote effective implementation of legal, regulatory and operational measures
for combating money laundering, terrorist financing and other related threats to the integrity of the
international financial system
monitors countries' progress in implementing the FATF Recommendations
reviews money laundering and terrorist financing techniques and counter-measures
Publication of press releases and reports on high risk countries
The FATF
How FATF works:
• FATF follows the soft law approach, which means that its guidelines are
not binding, but encourage voluntary cooperation
• Objectives:
– Annual self-assessment of each Member State
– On-site monitoring not only of Member States, but of all States of importance
to the financial system
– Publication of lists of non-cooperative countries (“name and shame”-campaign)
– Appearing on this list has a very negative impact on the reputation of the financial
sector of a country
The FATF
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Aim of applying the standards globally:
– FATF supports founding of regional sub-organisations (e.g. Moneyval)
– Common standard for on-site country assessment
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Support for countries which not yet fulfill the standards
Publication of non cooperative countries and Territories
– NCCT-list: currently Iran and North Corea
– Countries with deficiencies: currently 9 countries, e.g. Turkey, Syria, Yemen
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Special care has to be taken in doing business with offshore financial centers and
listed countris
Bilateral contacts to ensure application of standards
The FATF
The 40 FATF recommendations on money laundering:
• Set of principles to be tailored to a country’s commercial and legal system
• General framework (Art. 1-3)
• Role of a country’s legal system in the prosecution of money laundering
(Art. 4-7)
• Role of a country’s financial system in preventing money laundering (Art.
8-29)
• Role of regulatory and law enforcement agencies in combatting money
laundering (Art. 30-40)
The FATF recommendations
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Rec. 3: Countries should criminalize money laundering
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On the basis of the Vienna and Palermo Conventions
Apply the crime of money laundering to all serious offences
With a view to include the widest range of predicate offences
• Rec. 4: Confiscation and provisional measures
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Freezing, seizure or confiscation of laundered property, proceeds from money laundering or terrorist
offences and proceeds from or property allocated to financing of terrorism
Property of corresponding value should also be confiscated
Respect for the rights of bona fide third parties
Criminal conviction should not be necessary
Shifting of the burden of proof foreseen in the case of confiscation
The FATF recommendations
• The recommendations have a strong emphasis on the financial operators
– Customer due diligence (“Know your client”) (Rec. 10)
– Business contacts with foreign politically exposed persons should be treated
with special diligence (Rec. 12)
• Risk management and ongoing monitoring
• Decisions taken on senior level
• Take reasonable measures to establish the source of funds
– Reporting of suspicious transactions (Rec. 20)
• States have to take measures to protect financial institutions and their employees if
they report suspicious transactions
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Transparency and beneficial ownership of legal persons and legal arrangements
(Rec. 24 and 25)
– Legal Persons and legal arrangements may not be misused for hiding the true source of
the proceeds
MONEYVAL
• Monitoring body of the Council of Europe
• Evaluation according to FATF procedures of
– CoE Members not members of FATF
– CoE Members which become FATF members on request
– Monitoring of European standards not covered by FATF
• Reports on
– Features and magnitude of money laundering and the financing of terrorism
– Efficiency of measures taken to combat money laundering
• Research and review of progress