FATF and the 40 Recommendations

In one sentence: FATF is the international body that sets the global standard for fighting money laundering and terrorist financing, and the 40 Recommendations are that standard.

Why it matters

When a national regulator in the US, UK, Singapore or the UAE writes an AML law, they almost always base it on the FATF Recommendations. Understanding the FATF standard means understanding the foundation of compliance requirements worldwide.

Countries that do not comply with the standard are placed on the grey list (under increased monitoring) or the black list (call for action). Companies that operate in grey-listed jurisdictions face additional scrutiny from their banking partners.

How it works in practice

The 40 Recommendations are organized into seven thematic sections.

R.1 to R.2: AML/CFT policies and national coordination. Countries must apply a risk-based approach: assess national risks and apply controls proportionate to the level of risk identified.

R.3 to R.4: Money laundering and confiscation. Countries must criminalize money laundering and enable confiscation of proceeds and instrumentalities.

R.5 to R.8: Terrorist financing and financing of proliferation. Countries must criminalize terrorist financing and have controls to prevent financing of proliferation of weapons of mass destruction.

R.9 to R.23: Preventive measures. This is the section most directly relevant to financial institutions. It covers customer due diligence (R.10), record keeping (R.11), PEPs (R.12), correspondent banking (R.13), wire transfers (R.16), and suspicious transaction reporting (R.20).

R.24 to R.25: Transparency and beneficial ownership. R.24 requires countries to ensure that beneficial ownership information for legal persons (companies) is adequate, accurate, and accessible. R.25 applies the same standard to legal arrangements such as trusts.

R.26 to R.35: Powers and responsibilities of competent authorities. Covers financial intelligence units, supervisory powers, and law enforcement authority.

R.36 to R.40: International cooperation. Mutual legal assistance, extradition, and information-sharing between jurisdictions.

What regulators expect

Countries are assessed against the 40 Recommendations through mutual evaluations conducted by FATF and its associate bodies (FATF-Style Regional Bodies). The results are public. A poor evaluation leads to enhanced monitoring and pressure on correspondent banking relationships.

For a company, the practical implication is that your compliance program must be aligned with the FATF standard as implemented in your jurisdiction. If you operate across multiple jurisdictions, you need to apply the highest standard that applies.

Common mistakes

Treating FATF compliance as a separate requirement from national law. They are the same framework. Also: ignoring the grey and black lists when onboarding customers or partners from those jurisdictions.