Constructing the Compliance Chain – The FATF and its Decisive Role in AML and CFT

Modern-day financial crimes are diverse, complex, global, and most often very hard to detect. These crimes which include money laundering, financing terrorism, bribery and corruption are of a very serious nature and affect every nation and human around the globe.

One of the global organizations tasked with the prevention and tackling of these crimes is the Financial Action Task Force (FATF), including 37 member-states from across the world. The FATF puts into action different types of mechanisms and uses its member states’ influence to fight and prevent financial crimes while also encouraging major firms and companies to adopt its gold standard regarding AML and CFT. At Zotapay, we strive to achieve these standards of AML and CFT to be able to offer our clients the most secure and effective solutions, using the industry’s most trusted regulatory and risk management-related tools.  

1. Constructing the Compliance Chain – The FATF and its Decisive Role in AML and CFT

On 21 April 2022, the Ministers of the Financial Action Task Force (FATF) met to discuss the advancement of the international battle against financial crimes. The meeting was a part of the biennial FATF Summit which took place in Washington D.C.

Following the conclusion of this influential summit, we decided that we would like to expose you, the reader, to one of the building blocks in the global fight against financial crime – the FATF. In this short article, we will introduce this influential organization and briefly describe its different methods of combating financial crimes.

2. The Tale of an Intergovernmental Regulator – The FATF

The FATF is a Paris-based, intergovernmental organization that was established in 1989 with the initial purpose of harnessing the powers of the developed nations to prevent money laundering. Over the years, the scope of action of the organization was broadened and now includes the fight against terrorism financing and other threats to the global financial system. To tackle the numerous issues brought about by the advancement of global finance, the FATF utilizes different mechanisms such as its series of recommendations and guides in addition to their Mutual Evaluation Process. These set the international standard for combating terrorism financing and money laundering.

3. The Regulator’s Toolkit – Recommendations, Guides, and the Mutual Evaluation Process

An example of the FAFT guide is, “Guidance for a Risk-based Approach – Virtual Currencies”. This guide, for instance, attempts to tackle one of the more prominent potential threats of recent times – the unregulated usage of virtual assets and currency, also known as Cryptocurrency. Each member state is encouraged to implement and act based on these guidelines to crack down on local cryptocurrency trading. However, implementation is not mandatory as can be seen by the recent order of the Chinese Central Bank.

Another tool that is utilized by the FATF to further its efforts in the financial sphere is its Mutual Evaluation Process of its member states. Each evaluation involves a year-long assessment that includes an on-site visit by a team composed of several professionals from other member jurisdictions and headed by a representative of the FATF secretariat. Since 2004, all the 37 member states of the FATF have undergone a mutual evaluation. Some of these FATF member states include Brazil, India, and South Africa. These were all identified as lucrative markets, and entered into, respectively by Zotapay in 2021.

At Zotapay, we strive to achieve the highest standards of AML and CFT. We make it one of our main priorities to be able to offer our clients the most secure and effective solutions available, using the industry’s most trusted regulatory and risk management-related tools.

We join the call of the FATF Ministers and urge our friends in the fintech sector to join us and state their commitment to utilizing the best available resources to tackle these critical issues such as money laundering and terrorism financing which affect all of us.    

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