There are currently 40 members of the FATF; 38 jurisdictions and 2 regional organisations (the Gulf Cooperation Council and the European Commission). These 40 members are at the core of global efforts to combat money laundering and terrorist financing. There are also 31 international and regional organisations which are Associate Members or Observers of the FATF and participate in its work. 

Although the Gulf Cooperation Council (GCC) is a full Member of the FATF,  five of the individual Member countries of the GCC (Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates) are not. Saudi Arabia is an FATF member since June 2019.  As an FATF Member, the GCC is committed to implementing the anti-money laundering (AML) and counter-terrorist financing (CFT) measures agreed to by the FATF Members - in particular, the FATF Recommendations.

To monitor and assess the progress of its Members in implementing FATF standards, the FATF conducts a mutual evaluation exercise. As the GCC member countries are not Members of the FATF themselves, with the exception of Saudi Arabia, their mutual evaluations are conducted jointly with the regional AML/CFT body for the Middle East and North Africa (MENAFATF)

The Kingdom of the Netherlands (which comprises the Netherlands, Aruba, Curaçao and Saint Maarten) is a member of the FATF.

Aruba, Curaçao and Saint Maarten are self-governing Caribbean islands that are subject to separate mutual evaluations by CFATF, of which they are a member. 

The Channel Islands (Jersey and Guernsey) and the Isle of Man are not FATF Members. They are Crown Dependencies of the United Kingdom (which is an FATF Member). In October 2012 the Crown Dependencies of the UK became subject to assessment by MONEYVAL, and subject to its follow-up and other procedures and processes.

The goal of a large number of criminal acts is to generate a profit for the individual or group that carries out the act. Money laundering is the processing of these criminal proceeds to disguise their illegal origin. This process is of critical importance, as it enables the criminal to enjoy these profits without jeopardising their source.

Illegal arms sales, smuggling, and the activities of organised crime, including for example drug trafficking and prostitution rings, can generate huge amounts of proceeds. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to “legitimise” the ill-gotten gains through money laundering.

When a criminal activity generates substantial profits, the individual or group involved must find a way to control the funds without attracting attention to the underlying activity or the persons involved. Criminals do this by disguising the sources, changing the form, or moving the funds to a place where they are less likely to attract attention.

In response to mounting concern over money laundering, the Financial Action Task Force on money laundering (FATF) was established by the G-7 Summit in Paris in 1989 to develop a co-ordinated international response. One of the first tasks of the FATF was to develop Recommendations, 40 in all, which set out the measures national governments should take to implement effective anti-money laundering programmes.

By its very nature, money laundering is an illegal activity carried out by criminals which occurs outside of the normal range of economic and financial statistics. Along with some other aspects of underground economic activity, rough estimates have been put forward to give some sense of the scale of the problem.

The United Nations Office on Drugs and Crime (UNODC) conducted a study to determine the magnitude of illicit funds generated by drug trafficking and organised crimes and to investigate to what extent these funds are laundered.  The report estimates that in 2009, criminal proceeds amounted to 3.6% of global GDP, with 2.7%  (or USD 1.6 trillion) being laundered. 

This falls within the widely quoted estimate by the International Monetary Fund, who stated in 1998 that the aggregate size of money laundering in the world could be somewhere between two and five percent of the world’s gross domestic product.  Using 1998 statistics, these percentages would indicate that money laundering ranged between USD 590 billion and USD 1.5 trillion. At the time, the lower figure was roughly equivalent to the value of the total output of an economy the size of Spain.

However, the above estimates should be treated with caution.  They are intended to give an estimate of the magnitude of money laundering. Due to the illegal nature of the transactions, precise statistics are not available and it is therefore impossible to produce a definitive estimate of the amount of money that is globally laundered every year.  The FATF therefore does not publish any figures in this regard.

In the initial - or placement - stage of money laundering, the launderer introduces his illegal profits into the financial system. This might be done by breaking up large amounts of cash into less conspicuous smaller sums that are then deposited directly into a bank account, or by purchasing a series of monetary instruments (cheques, money orders, etc.) that are then collected and deposited into accounts at another location.

After the funds have entered the financial system, the second – or layering – stage takes place. In this phase, the launderer engages in a series of conversions or movements of the funds to distance them from their source. The funds might be channelled through the purchase and sales of investment instruments, or the launderer might simply wire the funds through a series of accounts at various banks across the globe. This use of widely scattered accounts for laundering is especially prevalent in those jurisdictions that do not co-operate in anti-money laundering investigations. In some instances, the launderer might disguise the transfers as payments for goods or services, thus giving them a legitimate appearance.

Having successfully processed his criminal profits through the first two phases the launderer then moves them to the third stage – integration – in which the funds re-enter the legitimate economy. The launderer might choose to invest the funds into real estate, luxury assets, or business ventures.

As money laundering is a consequence of almost all profit generating crime, it can occur practically anywhere in the world. Generally, money launderers tend to seek out countries or sectors in which there is a low risk of detection due to weak or ineffective anti-money laundering programmes. Because the objective of money laundering is to get the illegal funds back to the individual who generated them, launderers usually prefer to move funds through stable financial systems.

Money laundering activity may also be concentrated geographically according to the stage the laundered funds have reached. At the placement stage, for example, the funds are usually processed relatively close to the under-lying activity; often, but not in every case, in the country where the funds originate.

With the layering phase, the launderer might choose an offshore financial centre, a large regional business centre, or a world banking centre – any location that provides an adequate financial or business infrastructure. At this stage, the laundered funds may also only transit bank accounts at various locations where this can be done without leaving traces of their source or ultimate destination.

Finally, at the integration phase, launderers might choose to invest laundered funds in still other locations if they were generated in unstable economies or locations offering limited investment opportunities.

The integrity of the banking and financial services marketplace depends heavily on the perception that it functions within a framework of high legal, professional and ethical standards. A reputation for integrity is the one of the most valuable assets of a financial institution.

If funds from criminal activity can be easily processed through a particular institution – either because its employees or directors have been bribed or because the institution turns a blind eye to the criminal nature of such funds – the institution could be drawn into active complicity with criminals and become part of the criminal network itself. Evidence of such complicity will have a damaging effect on the attitudes of other financial intermediaries and of regulatory authorities, as well as ordinary customers.

As for the potential negative macroeconomic consequences of unchecked money laundering, one can cite inexplicable changes in money demand, prudential risks to bank soundness, contamination effects on legal financial transactions, and increased volatility of international capital flows and exchange rates due to unanticipated cross-border asset transfers. Also, as it rewards corruption and crime, successful money laudering damages the integrity of the entire society and undermines democracy and the rule of the law.

Launderers are continuously looking for new routes for laundering their funds. Economies with growing or developing financial centres, but inadequate controls are particularly vulnerable as established financial centre countries implement comprehensive anti-money laundering regimes.

Differences between national anti-money laundering systems will be exploited by launderers, who tend to move their networks to countries and financial systems with weak or ineffective countermeasures.

Some might argue that developing economies cannot afford to be too selective about the sources of capital they attract. But postponing action is dangerous. The more it is deferred, the more entrenched organised crime can become.

As with the damaged integrity of an individual financial institution, there is a damping effect on foreign direct investment when a country’s commercial and financial sectors are perceived to be subject to the control and influence of organised crime. Fighting money laundering and terrorist financing is therefore a part of creating a business friendly environment which is a precondition for lasting economic development.

The possible social and political costs of money laundering, if left unchecked or dealt with ineffectively, are serious. Organised crime can infiltrate financial institutions, acquire control of large sectors of the economy through investment, or offer bribes to public officials and indeed governments.

The economic and political influence of criminal organisations can weaken the social fabric, collective ethical standards, and ultimately the democratic institutions of society. In countries transitioning to democratic systems, this criminal influence can undermine the transition. Most fundamentally, money laundering is inextricably linked to the underlying criminal activity that generated it. Laundering enables criminal activity to continue.

Money laundering is a threat to the good functioning of a financial system; however, it can also be the Achilles heel of criminal activity.

In law enforcement investigations into organised criminal activity, it is often the connections made through financial transaction records that allow hidden assets to be located and that establish the identity of the criminals and the criminal organisation responsible.

When criminal funds are derived from robbery, extortion, embezzlement or fraud, a money laundering investigation is frequently the only way to locate the stolen funds and restore them to the victims.

Most importantly, however, targeting the money laundering aspect of criminal activity and depriving the criminal of his ill-gotten gains means hitting him where he is vulnerable. Without a usable profit, the criminal activity will not continue.

A great deal can be done to fight money laundering, and, indeed, many governments have already established comprehensive anti-money laundering regimes. These regimes aim to increase awareness of the phenomenon – both within the government and the private business sector – and then to provide the necessary legal or regulatory tools to the authorities charged with combating the problem.

Some of these tools include making the act of money laundering a crime; giving investigative agencies the authority to trace, seize and ultimately confiscate criminally derived assets; and building the necessary framework for permitting the agencies involved to exchange information among themselves and with counterparts in other countries.

It is critically important that governments include all relevant voices in developing a national anti-money laundering programme. They should, for example, bring law enforcement and financial regulatory authorities together with the private sector to enable financial institutions to play a role in dealing with the problem. This means, among other things, involving the relevant authorities in establishing financial transaction reporting systems, customer identification, record keeping standards and a means for verifying compliance.

Money launderers have shown themselves through time to be extremely imaginative in creating new schemes to circumvent a particular government’s countermeasures. A national system must be flexible enough to be able to detect and respond to new money laundering schemes.

Anti-money laundering measures often force launderers to move to parts of the economy with weak or ineffective measures to deal with the problem. Again, a national system must be flexible enough to be able to extend countermeasures to new areas of its own economy. Finally, national governments need to work with other jurisdictions to ensure that launderers are not able to continue to operate merely by moving to another location in which money laundering is tolerated.

Large-scale money laundering schemes invariably contain cross-border elements. Since money laundering is an international problem, international co-operation is a critical necessity in the fight against it. A number of initiatives have been established for dealing with the problem at the international level.

International organisations, such as the United Nations or the Bank for International Settlements, took some initial steps at the end of the 1980s to address the problem. Following the creation of the FATF in 1989, regional groupings – the European Union, Council of Europe, Organisation of American States, to name just a few – established anti-money laundering standards for their member countries. The Caribbean, Asia, Europe and southern Africa have created regional anti-money laundering task force-like organisations, and similar groupings are planned for western Africa and Latin America in the coming years.

The FATF is a policy-making body and has no investigative authority. In respect to investigating a company and persons involved in money laundering, individuals need to contact their local investigative authorities.

To assist assessment teams in upcoming mutual evaluations, the FATF compiles input from non-profit organisations (NPOs) and other civil society organisations on money laundering and terrorist financing risk and context.

For NPOs—as defined by the FATF—this could include information related to the implementation of risk-based measures to protect the sector from potential terrorist financing abuse. Similarly, input could include experiences of the application of the risk-based measures set out in Recommendation 8, or suggestions to help the assessment team identify which NPOs to gather more input from and/or interview during the on-site visit.

In order for assessment teams to consider input for upcoming assessments, please provide your input on a jurisdiction to contact@fatf-gafi.org no less than two months prior to the indicated onsite date. Please refer to the FATF mutual evaluation calendar for upcoming assessments and onsite dates.

Please note that any information provided to the FATF Secretariat will be shared with the assessment team, the assessed country, and external reviewers and the source of information will be identified. As assessors have huge volumes of material to review, please provide information in a succinct manner and in a format that mirrors the FATF Methodology . There is no mechanism under our FATF Procedures to provide feedback about how, or if, information received has been taken into account.

The mutual evaluation process is very thorough and intensive. In a single round of evaluations, the FATF assesses over 40 jurisdictions (other jurisdictions in the global network are assessed by the FATF-style Regional Bodies, the IMF and the World Bank). Each assessment takes 14 months for the team to complete. The FATF Plenary discusses and adopts two mutual evaluation reports at each of its three annual Plenary meetings. 

Yes. The completion of an assessment and the publication of the mutual evaluation report (MER) is a starting point for the country to continue strengthening its measures to tackle money laundering and terrorist financing.  The country subsequently reports back to the FATF on a regular basis on the progress it has made. After three years, the general expectation is for countries to have addressed most if not all of the technical compliance deficiencies identified in their MER. After five years, the FATF conducts a follow-up assessment which looks at the priority actions from the mutual evaluation report and the reforms the country has introduced to improve the effectiveness of its actions to protect the integrity of the financial system and their compliance with the FATF Recommendations. 

The FATF determines the dates of an assessment in consultation with the assessed country and in the case of a joint assessment, with the other assessing body/bodies.  The assessment is a demanding process that requires considerable resources from both assessing bodies and the assessed country.  FATF’s resources allow it to finalize 6 assessments each year.  

The FATF publishes the calendar of assessments at this link.
These dates are tentative. This calendar is regularly updated.

Members of the assessment team are subject to strict confidentiality agreements and are, therefore, not able to discuss the evaluation with outside parties or disclose any information obtained by reason of their participation either during or after the assessment.   This ensures the impartiality of the assessment.  After the assessment is concluded, the final published mutual evaluation report will identify the members of the assessment team.

During the on-site visit, the assessment team speaks to a range of:

• government authorities at policy and operational levels, including regulators and supervisors of financial institutions and designated non-financial businesses and professions (DNFBPs), financial intelligence units, law enforcement and intelligence agencies, prosecutorial and judicial authorities, customs and tax authorities
• representatives from the private sector financial institutions and DNFBPs which are covered by the FATF Recommendations.
• representatives from civil society, particularly non-profit organisations which are covered by FATF Recommendation 8 and Immediate Outcome 10.

The assessors, in consultation with the assessed country and Secretariat, decide who they need to speak with during the evaluation.

The mutual evaluation process is a peer review process and, as such, the assessment team is generally comprised of five to six experts with a range of experience from the governments of the FATF Membership and supported by the FATF Secretariat. Where the FATF is conducting an assessment jointly with an FSRB, the assessment team will also include at least one expert from the FSRB Membership and will also be supported by the FSRB Secretariat.

Because the FATF Recommendations cover a wide range of issues, each assessment team must include experts with a range of experience covering legal, law enforcement and Financial Intelligence Unit (FIU) issues, financial supervision and regulation, and international cooperation.

To ensure a consistently high quality of its mutual evaluations, the FATF organizes assessor training for these experts.  This training teaches assessors how to critically analyse a country’s technical compliance with the FATF Recommendations and how to assess whether the country’s AML/CFT measures are effective.

Only experts who have successfully completed this training can take part in an assessment. 

The FATF is not in a position to comment on the country’s implementation of AML/CFT measures while a mutual evaluation is ongoing. The conclusions from the on-site visit will be included in the mutual evaluation report which must first be discussed and adopted by the FATF Plenary. Mutual evaluation reports are published on the FATF public website about ten months after the on-site visit. For more information about the stages in the assessment process see http://www.fatf-gafi.org/publications/mutualevaluations/documents/more-about-mutual-evaluations.html

The FATF cannot comment on the effectiveness of a country’s framework to combat money laundering or terrorist financing on the basis of one law or regulation.  A country’s protection against these risks is a complex framework of legal, regulatory and operational measures.  The FATF can only comment on a country’s efforts to tackle money laundering and terrorist financing in the context of a mutual evaluation or related follow-up process in which it analyses the relevant legal and institutional framework, and discusses how effectively the country is preventing, detecting and punishing money laundering and terrorist financing. 

The latest mutual evaluation reports and subsequently published follow-up reports provide a snapshot of a country’s efforts to tackle these risks.  The country reports back regularly to the FATF on the actions it is taking to address the weaknesses identified in its mutual evaluation report.  Not all of these follow-up reports are published. The FATF’s 4th round procedures set out which reports will be made public: http://www.fatf-gafi.org/media/fatf/documents/methodology/FATF-4th-Round-Procedures.pdf

A mutual evaluation is a snapshot of the measures in place in a country during the assessment team’s on-site visit. Measures which come into force and effect after the on-site visit are not taken into account. The reason is because the assessment team is no longer in the country and able to fully discuss with the authorities and the private sector how measures are being implemented in practice. New measures which are put in place after the on-site will be taken into account subsequently during the mutual evaluation follow-up process.