FATF publishes first effectiveness study of the 4th country evaluation

On the basis of the fourth round of mutual evaluations of FATF member states and other countries (206 countries in total) regarding the implementation of preventive measures against money laundering and terrorist financing, the FATF, under the German leadership of Michael Pleyer, published the first effectiveness study on April 19, 2022.

The mutual evaluations have been taking place since 2013, shedding light on the implementation of the 40 FATF recommendations in the fight against money laundering and terrorist financing. The evaluations involve reviewing submitted documentation and on-site visits to the countries. Interviews are also conducted with government and private sector stakeholders, and a country report, including recommendations for action, is prepared. The FATF uses a standard to review Anti-Money Laundering and Counter-Terrorist Financing methods. If significant deficiencies in the prevention of money laundering and terrorism are discovered, the country is placed on the FATF country list. More than 200 countries have committed to the implementation of these standards and preventing new risks. The FATF monitors countries that have deficiencies with regard to their money laundering prevention and holds those that do not comply accountable. This resulted in the recommendations in the form of a country list. This list is an exhortation to other countries to apply special due diligence measures to the countries on the list. Likewise, it is a clear request to the countries on the list to significantly improve their fight against money laundering and terrorist financing.

The fourth round of evaluations focused on the effectiveness and adequacy of AML/CFT activities to assess whether they provide a robust legal and institutional framework.

Since 2012, the publication of the FATF recommendations, the percentage of countries that have implemented the recommendations in legal regulations has increased by 40 percent to 76 percent of all participating countries. The evaluations show that the countries surveyed are aware of the risk of money laundering and terrorist financing and are enacting legal ordinances to provide a framework for combating and preventing these illicit activities. Nevertheless, there is a lack of transparency regarding the beneficial owners of companies, especially in the case of shell companies. Here, a transparency register is the concrete requirement formulated by the FATF.

The private sector, especially large multinational banks and other financial institutions, are aware of the risk, according to the FATF's findings, and are expanding their activities in the fight against money laundering. In contrast, according to the FATF, other private sector actors, such as the real estate industry, tax advisors and accountants, but also notaries, have a low level of risk understanding with regard to money laundering and terrorist financing. As a result, the effectiveness of AML/CFT activities is low to moderate in 97 percent of countries.

Criminal and investigative units, such as the FIU (financial intelligence unit, in Germany a subdivision of customs), are in place in the majority of the states. Nevertheless, the expansion and specialization of prosecution by the authorities can be expanded.?Furthermore, the FATF has noted that cross-border cases and shell companies remain an Anti-Money Laundering challenge for these official institutions.

The FATF commends the efforts already made over the past decade in the fight against money laundering and terrorist financing. However, it also cautions that countries with low effectiveness rates need to do more and that implementing the FATF standards is not just about checking off boxes, but about actively taking the fight against money laundering and terrorism further.

Visit https://curentis.com/ueber-uns/news/ for the German version.