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Article
Publication date: 4 January 2008

Jackie Johnson

To gauge the extent to which the global financial system is anti‐money laundering (AML)/countering the financing of terrorism (CFT) prepared by analysing and comparing the…

1743

Abstract

Purpose

To gauge the extent to which the global financial system is anti‐money laundering (AML)/countering the financing of terrorism (CFT) prepared by analysing and comparing the AML/CFT systems of Financial Action Task Force (FATF) members with countries belonging to regional AML organisations.

Design/methodology/approach

Mutual evaluation data of 16 FATF members and 21 non‐FATF countries is analysed and compared using Kruskal‐Wallis and paired‐t tests to determine similarities and differences across the two groups of countries.

Findings

AML/CFT systems of FATF members and non‐FATF countries are poor. The lack of compliance with global AML/CFT standards leaves so many holes in these countries' regulatory, financial, and legal systems that money laundering with or without any relationship to the financing of terrorism, would be relatively easy to achieve.

Research limitations/implications

In using an analytical approach it has been necessary to put numerical values on compliance levels used by the FATF. Given that these are very broad, substituting a single value for each compliance level will provide only a crude measure of compliance for comparisons to be made. The results should therefore be used as a guide to the ranking and compliance of countries rather than some exact measurement of compliance.

Practical implications

There will need to be follow‐up visits to this round of mutual evaluations to evaluate country responses to their poor assessments.

Originality/value

Publication of mutual evaluations by the FATF and a number of regional bodies has enabled a comparison of AML/CFT systems from countries around the world. Lack of data has not enabled this to be done before.

Details

Journal of Financial Crime, vol. 15 no. 1
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 10 May 2011

Neil Jensen and Cheong‐Ann Png

This paper aims to examine the extent to which the Financial Action Task Force (FATF) 40+9 Recommendations have been implemented by developing countries from the…

1916

Abstract

Purpose

This paper aims to examine the extent to which the Financial Action Task Force (FATF) 40+9 Recommendations have been implemented by developing countries from the Asia‐Pacific region and the issues pertaining to these countries.

Design/methodology/approach

The paper uses the compliance ratings from published reports of assessments/mutual evaluations for these countries between 2004 and 2010 and makes comparisons with the ratings for FATF countries for that period.

Findings

These developing countries have demonstrated positive developments in addressing anti‐money laundering and combating the financing of terrorism (AML/CFT) requirements and having their level of compliance evaluated through the rigorous process of assessment/mutual evaluation. Nonetheless, the general level of compliance is quite limited, not least when compared with FATF countries. This may be due to complexities of the FATF 40+9 Recommendations, challenges in prioritizing AML/CFT development amidst other national priorities and general limited capacity in these countries. An appreciation of the challenges faced by these countries is essential in the formulation and implementation of AML/CFT measures for these countries.

Originality/value

This paper considers implementation of international standards for AML/CFT from the perspective of developing countries, which is an important contribution given the needs and peculiarities of these countries.

Details

Journal of Money Laundering Control, vol. 14 no. 2
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 28 June 2021

Firas Murrar

This study aims to define how countries can implement a risk-based approach (RBA) for non-profit organisations (NPOs) by measuring how well certain countries have complied…

Abstract

Purpose

This study aims to define how countries can implement a risk-based approach (RBA) for non-profit organisations (NPOs) by measuring how well certain countries have complied with the Financial Action Task Force’s (FATF) “Recommendation 8, criterion 1” (recommendation [8.1]).

Design/methodology/approach

This study combines a comparative analysis methodology with a descriptive analytical approach to compare three member countries of FATF and FATF-Style Regional Bodies (FSRBs). It uses secondary data sources, namely, FATF guidelines on the subject and FATF reports on mutual evaluation reports.

Findings

This study examines the variations in compliance with the FATF recommendation (8.1) among three countries recently assessed by the FATF: the UK, Bahrain and the Russian Federation. Although the UK has completely fulfilled these recommendations, Bahrain and Russia have largely fulfilled them. These variations in compliance are mainly attributed to the uneven level of preparedness in the countries’ commitment to the legislative requirements before the process of mutual evaluation.

Originality/value

This paper offers insight into the progress of legislation and mechanisms (technical compliance) in the three countries with respect to recommendation (8.1). This paper also discusses the evolution of implementing and adopting the RBA among NPOs. This paper concludes with suggestions to other countries in developing a plan that meets the FATF recommendations by considering key factors such as comprehensive assessment of threats to NPOs, periodic reassessment and sharing of success stories.

Details

Journal of Money Laundering Control, vol. 25 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 7 July 2020

Georgios Pavlidis

To critically examine two significant developments for the regulation and supervision of virtual assets and virtual assets services providers: the amendment of the…

Abstract

Purpose

To critically examine two significant developments for the regulation and supervision of virtual assets and virtual assets services providers: the amendment of the Financial Action Task Force (FATF) Recommendation No 15 in October 2018 and the adoption of an Interpretative Note in June 2019. We argue that new FATF standards constitute an appropriate response to money laundering and terrorist financing risks associated with virtual assets, but that they must be followed by firm, consistent and effective implementation at the national level.

Design/methodology/approach

This paper draws on reports, legislation, legal scholarship and other open source data in order to examine the new FATF standards on virtual assets.

Findings

The amendment of the FATF Recommendation No 15 in October 2018 and the adoption of an Interpretative Note in June 2019 have been necessary and opportune to forge a global approach to mitigate money laundering risks associated with crypto-assets. The new FATF standards on crypto-asset activities need to be implemented firmly, effectively and consistency to reduce the risk of jurisdiction-shopping by money launderers and terrorism financiers.

Originality/value

This is one of the first studies examining two important and recent FATF initiatives, the amendment of the FATF Recommendation No 15 in October 2018 and the adoption of an Interpretative Note in June 2019.

Article
Publication date: 5 June 2020

Doron Goldbarsht and Hannah Harris

This paper aims to explore the case of counter-terrorist financing (CTF) within the transnational regulatory network (TRN) of the Financial Action Task Force (FATF). The…

Abstract

Purpose

This paper aims to explore the case of counter-terrorist financing (CTF) within the transnational regulatory network (TRN) of the Financial Action Task Force (FATF). The paper demonstrates how the structure and operation of the FATF reflect those of a TRN and shows how the FATF has been successful in securing formal compliance with CTF policies.

Design/methodology/approach

The paper stresses that formal compliance does not guarantee actual compliance or effective enforcement. It is argued that the FATF and the CTF regime must balance concerns for legitimacy with those of flexibility and efficiency. Traditionally, TRNs have focused on flexibility, efficiency and informal cooperation over legitimacy. This paper demonstrates that legitimacy concerns cannot be ignored.

Findings

A lack of legitimacy may ultimately result in non-compliance and ineffectiveness. On this basis, current efforts to build legitimacy through the FATF are noted but deemed insufficient. If this balance is not struck, the FATF may be doomed to failure through an overreliance on coercive methods. Particularly in the case of CTF, coercion is insufficient for meaningful compliance. Global enforcement by diverse states is a necessary condition for the success of the regime.

Originality/value

This paper will fill the gaps existing in the literature by examining CTF, as well as the FATF as an example of TRN. This approach differs from other literature in the field, which deals solely with the effectiveness of the FATF and the global CTF without considering the effect of legitimacy on compliance.

Details

Journal of Financial Crime, vol. 27 no. 3
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 13 June 2020

Firas Murrar and Khaled Barakat

This study aims to define the role of the Financial Action Task Force (FATF) and its Style Regional Bodies (FSRBs) that combat money laundering (ML) and terrorist…

Abstract

Purpose

This study aims to define the role of the Financial Action Task Force (FATF) and its Style Regional Bodies (FSRBs) that combat money laundering (ML) and terrorist financing (TF) by measuring how well some Arab countries have complied with FATF’s “Forty Recommendations” with respect to the regulatory framework.

Design/methodology/approach

This study combines the comparative analysis methodology with a descriptive analytical approach to compare three member countries of the Middle East and North Africa Financial Action Task Force (MENAFATF). It uses secondary data sources, namely, theoretical literature on the subject and FATF reports on mutual evaluation reports (MERs).

Findings

This study examined the variations in compliance with FATF standards among three member countries of MENAFATF: Bahrain, Morocco and Jordan. While Bahrain has almost completely fulfilled these standards, Morocco and Jordan have only partially fulfilled them. These variations in compliance are mainly attributed to the uneven level of readiness in the countries’ commitment to the legislative and regulatory requirements before the process of mutual evaluation.

Originality/value

Researchers can find several studies on the role of FATF and FSRBs in combating ML and TF. However, no studies have focussed on the application levels of FATF standards, which are relevant to the regulatory frameworks of member countries. This study makes a unique and vital contribution, as it demonstrates the effectiveness of applying the FATF standards.

Details

Journal of Money Laundering Control, vol. 24 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 11 October 2011

Louis de Koker

The purpose of this paper is to identify key questions that should be addressed to enable the Financial Action Task Force (FATF) to provide guidance regarding the…

5273

Abstract

Purpose

The purpose of this paper is to identify key questions that should be addressed to enable the Financial Action Task Force (FATF) to provide guidance regarding the alignment of anti‐money laundering, combating of financing of terror and financial inclusion objectives.

Design/methodology/approach

The paper draws on relevant research and documents of the FATF to identify questions that are relevant to consider when it formulates guidance regarding the alignment between financial integrity and financial inclusion objectives.

Findings

The FATF advises that its risk‐based approach enables countries and institutions to further financial inclusion. It is, however, not clear what the FATF means when its uses the terms “risk” and “low risk”. It is also unclear whether current proposals for financial inclusion regulatory models will necessarily limit money laundering as well as terror financing risks to levels that can be described as “low”. The FATF will need to clarify its own thinking regarding low money laundering and low terror financing risk before it will be able to provide clear guidance to national regulators and financial institutions.

Originality/value

This paper was drafted to inform current FATF discussions regarding guidance on financial inclusion. The questions are relevant to all stakeholders in financial regulation.

Details

Journal of Financial Crime, vol. 18 no. 4
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 8 July 2014

Louis de Koker

– This paper aims to investigate the purpose, reach and effectiveness of the customer identification framework of the Financial Action Task Force (FATF).

Abstract

Purpose

This paper aims to investigate the purpose, reach and effectiveness of the customer identification framework of the Financial Action Task Force (FATF).

Design/methodology/approach

The article draws on relevant research and documents of the FATF, the Basel Committee on Banking Supervision and the Alliance for Financial Inclusion to determine whether compliance with the standards and practices of the FATF would prevent anonymous usage of financial services.

Findings

The FATF’s identification principles, guidance and practices resulted in processes that are largely bureaucratic and do not ensure that identity fraud is effectively prevented. Strict identification requirements on the other hand may impact on financial inclusion, leaving the FATF with little leeway to raise its standards. There are potential solutions, but they are longer-term and partial in nature.

Originality/value

Current identification and verification practices affect the lives of millions of people around the globe. The measures are being enforced to ensure that users are appropriately identified. This article informs the debate by highlighting the weaknesses of the current approach.

Article
Publication date: 2 July 2019

Emmanuel Senanu Mekpor

The purpose of this paper is to investigate how well countries comply with global anti-money laundering and counter-financing of terrorism (AML/CFT) regulations.

1001

Abstract

Purpose

The purpose of this paper is to investigate how well countries comply with global anti-money laundering and counter-financing of terrorism (AML/CFT) regulations.

Design/methodology/approach

With the help of an AML/CFT compliance index composed by the author, this study is able to numerically quantify countries’ AML/CFT compliance levels. Countries were selected based on their membership with the Financial Action Task Force (FATF), precisely members who have gone through at least one round mutual evaluation and have duly submitted a report to the task force. The AML/CFT index was composed by assigning numeric values to the individual country ratings across all 49 FATF recommendations contained in their mutual evaluation reports (MER).

Findings

Some notable findings include the yearly global level of AML/CFT compliance between the period 2004 and 2016, as well as compliance levels across continents for the same period. Compliance levels for the seven components of the FATF recommendations were also reported to help assess which set of recommendations countries comply with the most and why they do. It was also found that countries’ lack of compliance was as a result of high cost of compliance with FATF recommendations.

Research limitations/implications

The main limitation of this study was a lack of high-frequency AML data of countries, especially less-developed countries.

Originality/value

The uniqueness of this paper lies in the fact that the AML/CFT compliance index constructed and used in the study is the first of its kind.

Details

Journal of Money Laundering Control, vol. 22 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 8 May 2018

Ronald F. Pol

This article aims to constructively critique the new global methodology for evaluating the effectiveness of anti-money laundering regimes against defined outcomes.

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Abstract

Purpose

This article aims to constructively critique the new global methodology for evaluating the effectiveness of anti-money laundering regimes against defined outcomes.

Design/methodology/approach

With surprisingly little discussion at the intersection of the money laundering and policy effectiveness and outcomes scholarship and practice, this article combines elements of these disciplines and recent peer-review evaluations, to qualitatively assess the Financial Action Task Force’s (FATF’s) anti-money laundering “effectiveness” methodology.

Findings

FATF’s “effectiveness” methodology does not yet reflect an outcome-oriented framework as it purports. Misapplication of outcome labels to outputs and activities miss an opportunity to evaluate outcomes, as the impact and effect of anti-money laundering policies.

Practical implications

If the “outcomes” of the “effectiveness” framework do not match the crime and terrorism prevention policy goals of nation states, the new “main” component for assessing the effectiveness of anti-money laundering regimes potentially detracts focus and resources from, rather than towards, intended policy objectives.

Originality/value

There is a dearth of scholarship whether the global anti-money laundering “effectiveness” framework is sufficiently robust to assess effectiveness as it purports. This article begins addressing that gap.

Details

Journal of Money Laundering Control, vol. 21 no. 2
Type: Research Article
ISSN: 1368-5201

Keywords

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