The FATF Recommendations

The FATF has released a revised version of its Recommendations, which provide a comprehensive framework for countries to combat money laundering, terrorist financing, and proliferation financing of weapons of mass destruction. The FATF Recommendations are recognized as the international standard for combating these ML/TF/PF threats, and countries are expected to implement them through measures adapted to their particular circumstances.
These FATF Standards, which comprise the Recommendations and their Interpretive Notes, as well as the applicable definitions in the Glossary, are rigorously assessed through Mutual Evaluation processes, and through the assessment processes of the International Monetary Fund and the World Bank. The FATF also produces Guidance, Best Practice Papers, and other advice to assist countries with the implementation of the FATF standards.
Compared to the 2003 version of the Recommendations, the revised 2012 Recommendations consist of a reclassification into 40 Recommendations, which are divided into the following chapters A-G:
A: AML/CFT Policies and Coordination
B: Money Laundering and Confiscation
C: Terrorist Financing and Financing of Proliferation
D: Preventive Measures
E: Transparency And Beneficial Ownership of Legal Persons And Arrangements
F: Powers and Responsibilities of Competent Authorities and Other Institutional Measures
G: International Cooperation
Since 2012, they include several new measures aimed at addressing terrorist financing and the financing of proliferation. For example, R.5 criminalizes terrorist financing, while R.6 imposes targeted financial sanctions related to terrorism and terrorist financing. R.8 prevents the misuse of non-profit organizations for terrorist financing purposes. Additionally, R.7 ensures the consistent and effective implementation of targeted financial sanctions when called for by the UN Security Council.
The FATF emphasizes the importance of a close and constructive dialogue with the private sector, civil society, and other interested parties in ensuring the integrity of the financial system. The revision of the Recommendations has involved extensive consultation, and the FATF will continue to consider changes to the standards as appropriate in light of new information regarding emerging threats and vulnerabilities to the global financial system.
Comparing the latest November 2023 edition of the FATF Recommendations with the previous edition from February 2023, amendments to R.4, R.8, R.30, R.31 and R.38 are visible. We would thereby like to present the updated versions in full with tracked changes by highlighting in bolt & italic the new text in its amended form, quote:
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##### Recommendation 4: Confiscation and provisional measures
Countries should ensure that they have policies and operational frameworks that prioritise asset recovery in both the domestic and international context.
Taking into account the Vienna Convention, the Palermo Convention, the United Nations Convention against Corruption, and the Terrorist Financing Convention, countries should have measures, including legislative measures, to enable their competent authorities to:
a) identify, trace and evaluate criminal property and property of corresponding value;
b) suspend or withhold consent to a transaction;
c) take any appropriate investigative measures;
d) expeditiously carry out provisional measures, such as freezing and seizing, to preventany dealing, transfer or disposal of criminal property and property of corresponding value;
e) confiscate criminal property and property of corresponding value through conviction-based confiscation;
f) confiscate criminal property through non-conviction based confiscation;
g) enforce a resulting confiscation order; and
h) ensure effective management of property that is frozen, seized or confiscated.
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##### Recommendation 8: Non-profit organisations
Countries should identify the organisations which fall within the FATF definition of non-profit organisations (NPOs) and assess their terrorist financing risks. Countries should have in place focused, proportionate and risk-based measures, without unduly disrupting or discouraging legitimate NPO activities, in line with the risk-based approach. The purpose of these measures is to protect such NPOs from terrorist financing abuse, including:
(a) by terrorist organisations posing as legitimate entities;
(b) by exploiting legitimate entities as conduits for terrorist financing, including for the purpose of escaping asset-freezing measures; and
(c) by concealing or obscuring the clandestine diversion of funds intended for legitimate purposes to terrorist organisations.
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##### Recommendation 30: Responsibilities of law enforcement and investigative authorities
Countries should ensure that designated law enforcement authorities have responsibility for money laundering and terrorist financing investigations within the framework of national AML/CFT policies. At least in all cases related to major proceeds-generating offences, these designated law enforcement authorities should develop a pro-active parallel financial investigation when pursuing money laundering, predicate offences and terrorist financing. This should include cases where the associated predicate offence occurs outside their jurisdictions. Countries should ensure that competent authorities have responsibility for expeditiously identifying, tracing and initiating actions to freeze and seize criminal property and property of corresponding value. Countries should also make use, when necessary, of permanent or temporary multi-disciplinary groups specialised in financial or asset investigations. Countries should ensure that, when necessary, cooperative investigations with appropriate competent authorities in other countries take place.
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##### Recommendation 31: Powers of law enforcement and investigative authorities
When conducting investigations of money laundering, associated predicate offences and terrorist financing, competent authorities should be able to obtain access to all necessary documents and information for use in those investigations, and in prosecutions and related actions. This should include powers to use compulsory measures for the production of records held by financial institutions, DNFBPs and other natural or legal persons, for the search of persons and premises, for taking witness statements, and for the seizure and obtaining of evidence. Countries should ensure that competent authorities conducting investigations are able to use a wide range of investigative techniques suitable for the investigation of money laundering, associated predicate offences and terrorist financing. These investigative techniques include: undercover operations, intercepting communications, accessing computer systems and controlled delivery.
Countries should ensure that competent authorities have timely access to a wide range of information, particularly to support the identification and tracing of criminal property and property of corresponding value. This may include, but is not limited to, basic and beneficial ownership information, information held by tax authorities, information held in asset registries (such as for land, property, vehicles, shares, or other assets), and information held in citizenship, residency, or social benefit registries.
In addition, countries should have effective mechanisms in place to identify, in a timely manner, whether natural or legal persons hold or control accounts. They should also have mechanisms to ensure that competent authorities have a process to identify assets without prior notification to the owner. When conducting investigations of money laundering, associated predicate offences and terrorist financing, competent authorities should be able to ask for all relevant information held by the FIU.
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##### Recommendation 38: Mutual legal assistance: freezing and confiscation
Countries should have measures, including legislative measures, to take expeditious action in response to requests by foreign countries seeking assistance to identify, trace, evaluate investigate, freeze, seize and confiscate criminal property and property of corresponding value. These measures should also enable countries to recognise and enforce foreign freezing, seizing, or confiscation orders. Further, countries should be able to manage property subject to confiscation at all stages of the asset recovery process and share or return confiscated property. Countries should have in place the widest possible range of treaties, arrangements, or other mechanisms to enhance cooperation in asset recovery.