Financial Action Task Force FATF

The Financial Action Task Force is an intergovernmental body. It does not regulate businesses. Its work is to agree what a country's defences against money laundering and terrorist financing should look like, and then to check whether countries have built them.

It does three things. It writes the international standards, known as the FATF Recommendations. It assesses countries against those standards through mutual evaluations. It also publishes statements that name jurisdictions with strategic deficiencies in their regimes.

EU law names the FATF directly. The recitals to the Anti-Money Laundering Regulation describe the standards as the International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation, adopted by the FATF in February 2012 and amended since. The regulation calls them the revised FATF Recommendations.

They reach a firm through EU and national law, not directly. The Recommendations are addressed to countries. A law firm or an accounting practice in the EU answers to EU and national law and to its national supervisor. From 10 July 2027 the EU law in question is the AMLR.

The link between the two is written into the recitals. Both the AMLR and Directive (EU) 2024/1640 say that EU measures should be compatible with action taken at international level, and at least as stringent. They add that Union action should continue to take particular account of the FATF Recommendations, and that EU legal acts should be aligned with them where appropriate.

The recitals also point to specific rules that follow the standards. The five-year period for keeping customer due diligence information and transaction records is explained by reference to the revised FATF Recommendations. The extension of the rules to crypto-asset service providers and the transparency rules for discretionary trusts are each explained by reference to FATF standards.

A mutual evaluation is a peer assessment of one country's anti-money laundering system, published as a report. A firm would read one to judge the risk attached to a country where a client lives, is established or sends money from.

The AMLR treats these reports as a credible source. When a firm draws up its business-wide risk assessment, Article 10 tells it to take into account relevant information published by international standard setters. The recitals name FATF mutual evaluation reports as one source that AMLA's guidelines on this assessment could include.

The annexes use them to sort countries by risk. Annex II lists as a lower-risk factor a third country whose requirements, on the basis of credible sources such as mutual evaluations, are consistent with the revised FATF Recommendations and effectively implemented. Annex III lists as a higher-risk factor a third country identified by such sources as not having effective systems.

The FATF's public statements are the starting point for the EU's own lists, but the lists are separate. An obliged entity in the EU is bound by the EU lists. Under the AMLR, which applies from 10 July 2027, the Commission adopts them as delegated acts under Articles 29 to 31.

The recitals to the AMLR describe two FATF statuses. Countries subject to a call for action present significant strategic deficiencies of a persistent nature. Countries subject to increased monitoring have compliance weaknesses that they have committed to address. The AMLR builds a category on each, and adds a third for threats that the first two cannot mitigate. The table shows what the Commission takes into account for each category. The measures a firm must then apply are set out under enhanced due diligence.

FATF status also counts on its own. Annex III lists as a higher-risk factor any third country subject to increased monitoring, or otherwise identified by the FATF for compliance weaknesses. Because Article 10 requires a firm to take the Annex III factors into account, that status counts in its risk assessment even where no EU act names the country.

Both sets of lists change. Check the current FATF statements and the current Commission acts on the date of the assessment.