Money laundering and the financing of terrorism - European Union Committee Contents



The FATF first issued its Forty Recommendations in 1990 aimed at governments and financial institutions. Together, these Recommendations form a comprehensive regime against money laundering and have been accepted world-wide as one of the most comprehensive bases for tackling money laundering. The Recommendations were revised in 1996 to reflect all serious crimes.

In June 2003 the FATF published a significantly revised set of Forty Recommendations. The new Recommendations set out extended basic principles to prevent money laundering and drew heavily on the Basel Customer Due Diligence Principles. The need for a risk-based approach was specifically recognised. Specific focus was placed on three principal areas:

  • customer due diligence and the categories of customers or transactions that posed a potentially higher risk;
  • the transparency of corporate vehicles and identification of the beneficial owners with a particular emphasis on bearer shares and trusts;
  • the role of the non-financial businesses and professions in money laundering ('the gatekeepers').

The FATF recommendations have been endorsed and adopted, either in whole or in part, by more than 180 jurisdictions, the United Nations, the IMF and the World Bank. In July 2005 the UN Security Council in its Resolution 1617 determined that it "... strongly urges all Member States to implement the comprehensive international standards embodied in the FATF Forty Recommendations on Money Laundering and the FATF Nine Special Recommendations on Terrorist Financing".

The FATF principles for money laundering prevention

  • Money laundering should be criminalised on the basis of the UN conventions and applied to all individuals and legal persons, determining as appropriate which serious crimes should be covered in addition to drugs. (FATF Recommendations 1 & 2).
  • Appropriate measures should be put in place to confiscate the proceeds of crime. (FATF Recommendation 3).
  • Banking secrecy laws must not conflict with or inhibit the effectiveness of the money laundering strategy. (FATF Recommendation 4).
  • Administrative and regulatory obligations to develop systems and guard against money laundering should be imposed on all financial institutions. (FATF Recommendations 5-12 & 15).
  • Obligations should be placed on all financial institutions, that if they know or suspect, or have reasonable grounds to suspect, that funds derive from criminal activity, they should report those suspicions promptly to the competent authorities. (FATF Recommendations 13 & 16).
  • The obligations for developing anti-money laundering systems, controls and reporting procedures should be applied to designated non-financial businesses and professions, recognising, as appropriate, the concept of legal privilege. (FATF Recommendations 16, 20 & 24-25).
  • Financial and non-financial sector businesses, their directors and employees, should be protected against breach of confidentiality if they report their suspicions in good faith. (FATF Recommendation 14).
  • Appropriate, proportionate and dissuasive sanctions should be introduced for non-compliance with anti-money laundering or terrorist financing requirements. (FATF Recommendation 17).
  • Countries should not approve the establishment or accept the continued operation of shell banks. (FATF Recommendation 18).
  • Countries should consider implementing feasible measures to detect or monitor the physical cross-border transportation of cash and bearer-negotiable instruments, and should impose a requirement on financial institutions and intermediaries to report all transactions above a certain amount. (FATF Recommendation 19).
  • Appropriate measures should be taken to ensure that financial institutions give special attention to business relationships and transactions whose anti-money laundering and anti-terrorist measures are inadequate. (FATF Recommendations 21-22).
  • Countries should ensure that financial institutions, designated non-financial businesses and professions are subject to adequate regulation and supervision, and that criminals are prevented from owning and controlling financial institutions. (FATF Recommendations 23-25).
  • Appropriate law enforcement mechanisms should be put in place to process, investigate and prosecute suspected reports of money laundering, and an FlU should be established as the national receiving centre for information on money laundering and terrorist financing. (FATF Recommendations 26-32).
  • Countries should ensure the transparency of legal persons, and structures can be accessed on a timely basis. (FATF Recommendations 33 & 34).
  • Countries should rapidly, constructively and effectively provide the widest possible range of mutual legal assistance in relation to money laundering and terrorist financing investigations, prosecutions and related proceedings, and provide the widest range of international co-operation to their foreign counterparts. (FATF Recommendations 36-40).

The complete text of the FATF Recommendations and interpretative notes can be accessed through the FATF website

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