FATF Introduction

CAMS STUDY GUIDE
2 International AML/CFT Standards
 Financial Action Task Force
 Basel Committee on Banking Supervision
 European Union Directives on Money Laundering
 FATF-Style Regional Bodies
 Egmont Group of Financial Intelligence Units
 Wolfsberg Group
 USA PATRIOT Act
 Office of Foreign Assets Control
M A Islam, CDCS, CSDG, CAMS Compliance Route

Financial Action Task Force
Introduction
FATF Objectives
Mutual Evaluation
Technical Compliance Assessment
Effectiveness Assessment
FATF Power
FATF Members and Observers
Non-Cooperative Countries
2 - Public documents

INTERNATIONAL AML/CFT STANDARDS
FATF Plenary in session

Financial Action Task Force
The Financial Action Task Force (FATF) is an inter-governmental

body established in 1989 by the Ministers of its Member
jurisdictions.
The FATF is a “policy-making body” which works to generate the

necessary political will to bring about national legislative and
regulatory reforms in these areas.

Significant activities of the FATF
1989 –Established at G-7 of Economic Summit (Paris)
1990 – FATF Issued it 40 Recommendation
1996 – 1st Revision of 40 Recommendation
2000 – FATF published its first list of NCCTs
2001 – FATF adopted 8 special Recommendation on TF
2003 – 2nd Revision of 40 Recommendation
2004 – FATF adopted 9th special Recommendation on TF
2012 – Substantially revised the Recommendation

FATF President 2020-2021
He FATF President is a senior official appointed by the FATF

Plenary from among its members for a term of one year .
The term of the President begins on 1 July and ends on 30

June of the following year. The President convenes and
chairs the meetings of the FATF Plenary and the Steering
Group, and he/she oversees the FATF Secretariat.
Dr. Marcus Pleyer

Germany

FATF 30 Years
The Financial Action Task Force (FATF) was established in July 1989 by a Group of
Seven (G-7) Summit in Paris, initially to examine and develop measures to combat
money laundering.
FATF 30 Years - 1989-2019

Mandates
Since its creation, FATF has been working under five-year mandates.
In May 2004, its members extended the organization’s charter by a record

eight years, signalling the possibility that it may become a permanent
institution in global ML and TF control efforts.
In April 2012, the mandate was extended to December 31, 2020.

Open-ended Mandate
We agree to make this Mandate open-ended starting

in 2020, recognizing that the FATF has evolved from a
temporary forum to a sustained public and political
commitment to fight money laundering, terrorist
financing, and proliferation financing. We will
increase our engagement as Ministers of the FATF by
meeting every two years, starting from 2022, to
discuss strategic issues and to take stock of FATF
progress in its mandate.

FATF Secretariat
The Secretariat is located at the OECD Headquarters in

Paris, France
FATF can be located online at http://www.fatf-gafi. org/.com

FATF Objectives
Set standards and promote effective implementation of legal,

regulatory and operational measures for combatting ML, TF and other
related threats to the integrity for the international financial system.

FATF fulfils these objectives by focusing on several important tasks
including:
1 Spreading the AML message worldwide
2 Monitoring implementation of the FATF Rs among its members.
3 Reviewing ML trends and countermeasures

1 Spreading the AML message worldwide:
The group promotes the establishment of a global AML and CTF network
based on
Expansion of its membership
Development of regional AML bodies in various parts of the

world
Cooperation with other international organizations.

Mutual Evaluation
The FATF conducts peer reviews of each member on an ongoing basis to assess
levels of implementation of the FATF Recommendations, providing an in-depth
description and analysis of each country's system for preventing criminal abuse
of the financial system.

In 2011, FATF concluded its third round of mutual evaluations of all its
members. The process began in 2004.
For its fourth round of mutual evaluations, which started in 2014, it

adopted a new approach for assessing technical compliance with Rs and
assessing a member’s AML/CFT system is effective.
The new Methodology, which was released in 2013, is informed by the

experience of FATF , FSRBs, IMF and World Bank in conducting
assessments of compliance with earlier versions of the FATF Rs.

Mutual Evaluation Process
Technical Compliance Assessment:
Effectiveness Assessment:

Technical Compliance Assessment:
Evaluates the specific requirements of the FATF Rs how a member relates

them to its relevant
Legal and institutional framework
the powers and procedures of its competent authorities
The focus is on the fundamental building blocks of an AML/CFT system
For each Recommendation, assessors reach a conclusion about whether a

country complies with the FATF standard.
Technical compliance ratings
1 Compliant C There are no shortcomings.
2 Largely compliant LC There are only minor shortcomings.
3 Partially compliant PC There are moderate shortcomings.
4 Non-compliant NC There are major shortcomings.
Not applicable NA A requirement does not apply, due to the structural,

5 legal or institutional features of a country.

Effectiveness Assessment:
Seeks to assess the adequacy of a member’s implementation of the FATF

Recommendations, and identifies the extent to which a member achieves a
defined set of outcomes that are central to a robust AML/CFT system.
The focus is on the extent to which the legal and institutional framework of
the member is producing the expected results.
For the purposes of the 2013 Methodology, FATF defines effectiveness as

“the extent to which the defined outcomes are achieved.”
Effectiveness is evaluated on the basis of 11 Immediate Outcomes:
1. ML/ TF risks are known and actions coordinated to combat or thwart the proliferation of ML/TF.
2. International cooperation provides actionable information to use against criminals.
3. Supervisors regulate FI and NBFIs and their risk-based AML/CFT programs.
4. FI and NBFIs apply preventative measures and STR.
5. Legal persons are not misused for ML/TF and BO ship information is available to authorities.
6. Financial intelligence information is used by authorities in ML and TF investigations.
7. ML offenses are investigated, criminally prosecuted, and sanctions imposed.
8. Proceeds of crime are confiscated.
9. TF offenses are investigated, criminally prosecuted, and sanctions imposed.
10. Terrorists and terrorist organizations are prevented from raising, moving, and using money,
and not permitted to abuse NPOs.
11. Persons and organizations involved in the proliferation of weapons of mass destruction are
prevented from raising, moving, and using Money
They also feed into the 3 Intermediate Outcomes that represent major
thematic goals of AML/CFT measures:
1. Policy, cooperation, and coordination to mitigate ML and TF.
2. Prevention of proceeds of crime into the financial system and reporting of

such when they do.
3. Detection and disruption of ML/TF threats

Effectiveness ratings
High level of effectiveness The Immediate Outcome is achieved to a

1 very large extent.
Minor improvements needed.
Substantial level of effectiveness The Immediate Outcome is achieved to a

2 large extent.
Moderate improvements needed.
Moderate level of effectiveness The Immediate Outcome is achieved to some

3 extent
Major improvements needed.
Low level of effectiveness The Immediate Outcome is not achieved or

4 achieved to a negligible extent.
Fundamental improvements needed..
FATF Power
FATF does not have the power to impose fines or

penalties against recalcitrant member-nations.

Peer Pressure Policy.
In 1996, FATF launched a policy for dealing with nations that fail to comply with
the FATF R. that it describes as “a graduated approach aimed at enhancing
peer pressure.” This graduated approach ranges from requiring the country to
deliver a progress report at plenary meetings to suspension of membership.

Peer Pressure Policy.
In September 1996, Turkey became the first FATF member exposed to the
peer pressure policy.
Although a member since 1990, Turkey had yet to criminalize ML.
FATF issued a warning to FI worldwide to be vigilant of business relations

and transactions with persons and entities in Turkey due to its lack of
laundering controls. One month later, Turkey enacted a ML law.

3 Reviewing ML trends and countermeasures
Financial system that has few geographic limitations, operates around the clock in
every time zone, and maintains the pace of the global electronic highway, criminals
are constantly searching for new points of vulnerability and adjusting their laundering
techniques to respond to counter-measures introduced by FATF members and other
countries. As such, FATF members are continually gathering information on ML trends
to ensure the organization’s R. remain up to date.
For example, in October 2013, FATF and the Egmont Group of FIUs
released a research report on ML And TF Through Trade In Diamonds,
which examined the vulnerabilities and risks of the “diamond pipeline,”
and covered all sectors of the diamond trade, including production,
rough diamond sale, cutting and polishing, jewellery manufacturing and
jewellery retailers.

FATF currently comprises 37 member jurisdictions and 2 regional

organizations.
There are also 31 associate members or observers of FATF (mostly

international and regional organizations) that participate in its work.

The 35 member jurisdictions are: Argentina, Australia, Austria, Belgium, Brazil, Canada, China,
Denmark, Finland, France, Germany, Greece, Hong Kong (China), Iceland, India, Ireland, Italy,
Israel, Japan, Republic of Korea, Luxembourg, Malaysia, Mexico, the Netherlands, New
Zealand, Norway, Portugal, the Russian Federation, Singapore, South Africa, Southy Arab
Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the US.

FATF currently comprises 37 member jurisdictions and 2 regional

organizations.
Gulf Cooperation Council (GCC)
European Commission
GCC Although the Gulf Cooperation Council (GCC) is a full

member of FATF, the individual member countries of the
Countries of GCC GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and
the United Arab Emirates) are not.

FATF Membership Criteria
The following criteria are applied before considering a country as a potential candidate for
FATF membership:
1 Fundamental Criteria of Membership
2 Technical and Other Criteria
3 Mutual evaluation and Granting of Membership

A The jurisdiction should be strategically important based on quantitative and

qualitative indicators and additional considerations:
 Quantitative Indicators:
 Qualitative Indicators:
 Additional considerations
B FATF’s geographic balance should be enhanced by the jurisdiction becoming a

member.

 Quantitative Indicators:
 Size of GDP
 Size of the banking, insurance and securities sectors.
Strategically important
 Population
 Qualitative Indicators:
 Impact on the global financial system : Degree of openness
 Active participation in a FSRB and regional prominence in AML/CFT efforts
 Level of AML/CFT risks faced and efforts to combat those risks

A
 Additional considerations
 Level of adherence to financial sector standards.
 Participation in other relevant international organizations.
B FATF’s geographic balance should be enhanced by the jurisdiction becoming a member.
FATF Members

A The country should provide a written commitment at the political/ministerial level:.
Endorsing and supporting the 2012 FATF Recommendations and the FATF
I AML/CFT Methodology 2013 (as amended from time to time).
Agreeing to undergo a mutual evaluation during the membership process for

II
the purposes of assessing compliance with FATF membership criteria, using
the AML/CFT Methodology applicable at the time of the evaluation, as well
as agreeing to submit subsequent follow-up reports.
III Agreeing to participate actively in the FATF and to meet all the other
commitments of FATF membership, including supporting the role and work
of the FATF in all relevant forum

B  The Plenary decides that a high level visit to the country should be arranged in
order to verify with the relevant Ministers, representatives of the Parliament and
competent authorities the written commitment, as well as to determine whether
the country will be in a position to undergo a successful Mutual Evaluation and
achieve a satisfactory level of technical compliance.
 The high level visit should include the President of the FATF, selected members
of the Steering Group and heads of delegations. It is accompanied by the FATF
Secretariat.
 Based on the outcomes of the report of the high level visit, the Plenary may
decide to invite the country to participate in the FATF as an observer.

3 Mutual evaluation and Granting of Membership
A Within a maximum of three years after being invited to participate in the

FATF as an observer, the mutual evaluation process for the country
should be launched.
B Membership is granted if the mutual evaluation is satisfactory.

A mutual evaluation is not satisfactory if the country:
I has 8 or more NC/PC ratings

compliance
Technical
II Is rated NC/PC on any one or more of R.3, 5, 10, 11 and 20,
has a low or moderate level of effectiveness for 7 or more of the 11

Effectiveness
III
effectiveness outcomes
has a low level of effectiveness for 4 or more of the 11 effectiveness

IV
outcomes
If the mutual evaluation is not satisfactory, but close to being satisfactory, then the country
should provide a clear commitment at political/Ministerial level to reach the expected results
within a reasonable timeframe (i.e., a maximum of four years).
“naming and shaming”
Non-Cooperative Countries and Territories (NCCTs)
On February 14, 2000, FATF published an initial report on NCCT that set out the 25
criteria that help identify relevant detrimental rules and practices and that are
consistent with the 40 R.

The 25 distinct criteria covered the following 4 broad areas:
1 Loopholes in financial regulations
2 Obstacles raised by other regulatory requirements
3 Obstacles to international cooperation
4 Inadequate resources for preventing and detecting ML activities

NCCT countries from 2000 to 2006

The NCCT list was replaced by a new process when FATF started identifying
jurisdictions with deficiencies in their AML/CFT regimes.
NCCT list Public documents
Replaced
Today, FATF identifies these jurisdictions in

two public documents issued
three times a year.
FATF identifies jurisdictions in
Public documents
Times a year

Public documents
1. Public Statement -
2. Improving Global AML/CFT Compliance-

1.Public Statement - October 2019
Democratic People's Republic of Korea (DPRK)
Iran
2.Improving Global AML/CFT Compliance: On-going Process - October 2019
Bahamas Pakistan
Botswana Panama
Cambodia
Syria
Ghana
Trinidad and Tobago
Iceland
Yemen
Mongolia
Zimbabwe
1. FATF’s Public Statement identifies:
Countries or jurisdictions with strategic deficiencies that are so serious that

FATF calls on its members and non-members to apply counter-measures.
Countries or jurisdictions for which the FATF calls on its members to apply
EDD measures proportionate to the risks arising from the deficiencies
associated with the country.

2. Improving Global AML/CFT Compliance
on-going process identifies
Countries or jurisdictions with strategic weaknesses in AML/CFT

measures but that have provided a high-level commitment to an
action plan developed with the FATF.
FATF encourages its members to consider the strategic deficiencies

identified within these jurisdictions.
If a country fails to make sufficient or timely progress, FATF can increase its
pressure on the country to make meaningful progress by moving it to the
Public Statement.

2. Improving Global AML/CFT Compliance
on-going process identifies
The document also provides information on jurisdictions no longer subject to

FATF’s on-going global AML/CFT compliance process.
Typically, a country is identified to have made significant progress in

improving its AML/CFT regime when it establishes a legal and
regulatory framework to meet its commitments in its action plan
regarding the previously identified strategic deficiencies.
However, the country must continue to work with the appropriate

FSRB on addressing the items noted in its mutual evaluation report.

Jurisdictions No Longer Subject to the FATF's
On-Going Global AML/CFT Compliance Process
Ethiopia Sri Lanka Tunisia
The FATF welcomes Sri Lanka's significant progress in improving its

AML/CFT regime and notes that Sri Lanka has strengthened the
effectiveness of its AML/CFT regime and addressed related technical
deficiencies to meet the commitments in its action plan regarding the
strategic deficiencies that the FATF identified in November 2017.
Sri Lanka is therefore no longer subject to the FATF’s monitoring
process under its ongoing global AML/CFT compliance process. Sri
Lanka will continue to work with APG to improve further its AML/CFT
regime.
Public documents
From 21 February 2020
 High-Risk Jurisdictions subject to a Call for Action
‘Black list’.
 Jurisdictions under Increased Monitoring
‘Grey list’.

Q. What does the Financial Action Task Force (FATF) urge its members and all other
jurisdictions to do when a jurisdiction is identified as having lax anti-money
laundering / counter financing of terrorism controls?
A Consider customers from that jurisdiction as high risk
B Apply economic sanctions until otherwise notified by FATF
C Cease doing business with that jurisdiction immediately
D Apply counter-measures to that jurisdiction.

Q. What do the Financial Action Task Force (FATF) mutual evaluations of each member
assess?
A If the member has a large enough economy to maintain its membership
B The member’s ability to send a representative to the plenary sessions.
C If the member has made any suggestions for updates to the FATF
Recommendations.
D The levels of implementation of the FATF Recommendations
Answer :

Q. Which of the following represents the first Financial Action Task Force initiative?
A The 40 Recommendations on Money Laundering
B The Report on Non-Cooperative Countries and Territories.
C The Report on Money Laundering Typologies
D The Special Recommendations on Terrorist Financing
Answer : A
Q. Which of the following options are available to FATF in taking measure against its
disobedient member nation? Choose Two
A Imposing fine
B Cancellation of membership
C Increasing peer pressure
D Suspension of membership
Answer : C D
Q. What are the criterion for FATF membership? Choose two
A Make it mandatory for FI to identify PEPs and BO
B Be full and active member of a FATF-style regional body.
C Be strategically important.
D Be already implemented the FATF standards.
E Be already complied with all wolfsberg principal.
Answer : B C
Q. Which of the following three important tasks that FATF focuses on ?
A Reviewing money laundering trends and counterm asures
B Promotes sound supervisory standards worldwide
Increasing the effectiveness of FIUs by offering training and promoting personnel

C exchanges
D Monitoring implementation of the FATF R. among FATF members
E Spreading the anti-money laundering message worldwide
Answer A D E

Q. For updating jurisdictions with high risk, How much times in a year and how many documents
FATF published?
A Three public documents issued two times a year
B Two public documents issued two times a year
C Two public documents issued three times a year
D Three public documents issued three times a year
Answer C
Which of the following is the most likely reason for the Financial Action Task
Q. Force to remove a jurisdiction from the Non-Cooperative Countries and
Territories list?
Conducting successful annual self-assessments.

A
B Entering into a mutual legal assistance treaty.
C Joining the Wolfsberg Group.
D Receiving a favorable mutual evaluation report.
Answer : D

Q. What are the criteria for becoming a FATF Member? Choose three
A The jurisdiction should be strategically important based on quantitative and

qualitative indicators and additional considerations.
B The country should provide a written commitment at the secretary level.
C Within a maximum of four years after being invited to participate in FATF as an

observer the mutual evaluation process for the country should be launched.
D FATF’s geographic balance should be enhanced by the jurisdiction becoming a

member.
E Membership is granted if the mutual evaluation is satisfactory
Answer A D E
Q. In respect of FATF 40 R, which of the following sentence is correct ?
A Financial institutions should assess these risks after launching new products.
Financial institutions and the employees reporting suspicions activities may be

B protected from liability for reporting and should be allowed to disclose that they have
reported such activity.
C Countries should not approve the establishment/ continued operation of shell banks.
D Countries should take measures to prevent the misuse of legal persons for ML or TF.
Answer C
Muhammad Ashraful Islam
CDCS CSDG CAMS MBA

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CAMS STUDY GUIDE

2 International AML/CFT Standards

 Financial Action Task Force

 Basel Committee on Banking Supervision

 European Union Directives on Money Laundering

 FATF-Style Regional Bodies

 Egmont Group of Financial Intelligence Units

 USA PATRIOT Act

 Office of Foreign Assets Control

M A Islam, CDCS, CSDG, CAMS Compliance Route

FATF Members and Observers

M A Islam, CDCS, CSDG, CAMS Compliance Route

FATF Plenary in session

The Financial Action Task Force (FATF) is an inter-governmental

The FATF is a “policy-making body” which works to generate the

M A Islam, CDCS, CSDG, CAMS Compliance Route

1989 –Established at G-7 of Economic Summit (Paris)

1990 – FATF Issued it 40 Recommendation

1996 – 1st Revision of 40 Recommendation

2000 – FATF published its first list of NCCTs

2001 – FATF adopted 8 special Recommendation on TF

2003 – 2nd Revision of 40 Recommendation

2004 – FATF adopted 9th special Recommendation on TF

2012 – Substantially revised the Recommendation

M A Islam, CDCS, CSDG, CAMS Compliance Route

He FATF President is a senior official appointed by the FATF

The term of the President begins on 1 July and ends on 30

Dr. Marcus Pleyer

M A Islam, CDCS, CSDG, CAMS Compliance Route

FATF 30 Years - 1989-2019

M A Islam, CDCS, CSDG, CAMS Compliance Route

In May 2004, its members extended the organization’s charter by a record

In April 2012, the mandate was extended to December 31, 2020.

We agree to make this Mandate open-ended starting

M A Islam, CDCS, CSDG, CAMS Compliance Route

The Secretariat is located at the OECD Headquarters in

FATF can be located online at http://www.fatf-gafi. org/.com

M A Islam, CDCS, CSDG, CAMS Compliance Route

Set standards and promote effective implementation of legal,

M A Islam, CDCS, CSDG, CAMS Compliance Route

1 Spreading the AML message worldwide

2 Monitoring implementation of the FATF Rs among its members.

3 Reviewing ML trends and countermeasures

M A Islam, CDCS, CSDG, CAMS Compliance Route

Expansion of its membership

Development of regional AML bodies in various parts of the

Cooperation with other international organizations.

M A Islam, CDCS, CSDG, CAMS Compliance Route

M A Islam, CDCS, CSDG, CAMS Compliance Route

For its fourth round of mutual evaluations, which started in 2014, it

The new Methodology, which was released in 2013, is informed by the

M A Islam, CDCS, CSDG, CAMS Compliance Route

M A Islam, CDCS, CSDG, CAMS Compliance Route

Evaluates the specific requirements of the FATF Rs how a member relates

Legal and institutional framework

the powers and procedures of its competent authorities

The focus is on the fundamental building blocks of an AML/CFT system

For each Recommendation, assessors reach a conclusion about whether a

1 Compliant C There are no shortcomings.