FATF Recommendations

The FATF Recommendations are the internationally agreed standards for fighting money laundering, the financing of terrorism and the financing of the proliferation of weapons of mass destruction. They are issued by the Financial Action Task Force, an intergovernmental body, and consist of forty numbered recommendations, each with an interpretive note and a shared glossary. They tell governments what laws, institutions and powers they should have, and they are the source of most of the obligations that banks and payment companies know as anti-money laundering rules.

The Recommendations are not a treaty and bind no one directly. Their force comes from peer pressure and from consequences in the financial system: more than 200 jurisdictions have committed to them, compliance is assessed publicly, and countries judged deficient can find their banks cut off from international business. National laws, such as the European anti-money laundering directives and the United States Bank Secrecy Act framework, translate them into binding rules.

The task force was created by the G7 summit in Paris in 1989, and the first forty Recommendations were published in 1990, aimed at the laundering of drug money through banks. They were revised in 1996 and 2003 to cover other crimes and other types of business. After the attacks of September 2001, eight and then nine Special Recommendations on terrorist financing were added. A comprehensive revision in 2012 merged everything into the present forty, introduced the financing of proliferation, and placed the risk-based approach at the centre. Individual recommendations have been amended since, notably on virtual assets in 2019, on beneficial ownership in 2022 and 2023, and on payment transparency in 2025.

The forty Recommendations are grouped into seven areas.

• Policies and coordination. Countries must assess their risks and apply a risk-based approach, directing resources to where risk is highest.
• Money laundering and confiscation. Laundering must be a criminal offence covering a wide range of underlying crimes, and authorities must be able to freeze and confiscate proceeds.
• Terrorist financing and proliferation. Countries must criminalize terrorist financing, implement targeted financial sanctions under United Nations resolutions, and protect non-profit organizations from abuse.
• Preventive measures. This is the largest group and the one addressed to the private sector, described below.
• Transparency of legal persons and arrangements. Information on the beneficial ownership of companies and trusts must be available to authorities.
• Powers of authorities. Countries need effective supervisors, a financial intelligence unit, capable investigators and proportionate sanctions.
• International cooperation. Countries must be able to exchange information, give mutual legal assistance and extradite.

The recommendations most familiar to practitioners require financial institutions, and designated non-financial businesses such as casinos, lawyers, accountants and dealers in precious metals, to apply a common set of controls.

Institutions must carry out customer due diligence: identify and verify customers and their beneficial owners, understand the purpose of the relationship and monitor it. They must keep records for at least five years. Additional measures apply to a politically exposed person, to correspondent banking relationships and to business with higher-risk countries, a set of requirements generally referred to as enhanced due diligence. Providers of money or value transfer services must be licensed or registered and must oversee their agents.

Institutions must report suspicions to the financial intelligence unit through a suspicious transaction report and must not tip off the customer. They also need internal policies, a compliance function, training and independent audit.

Recommendation 16 deals with payment transparency. It requires that information on the originator and beneficiary accompany a transfer along the payment chain, so that authorities can trace funds and institutions can screen the parties. Revisions agreed in 2025 updated it for modern payment chains, clarifying which institution is responsible for the information when intermediaries are involved and standardizing what must be sent with cross-border payments above a threshold.

Recommendation 15 concerns new technologies. Since 2019 it has required countries to license or register virtual asset service providers, supervise them, and apply the preventive measures to them, including the obligation to transmit originator and beneficiary details with transfers, known in the industry as the travel rule.

Compliance is tested through mutual evaluations, peer reviews conducted by the task force or by one of nine regional bodies that follow the same methodology. Each evaluation rates technical compliance with every Recommendation on a four-point scale from compliant to non-compliant, and separately rates effectiveness against eleven outcomes, asking whether the system actually produces results such as prosecutions, confiscations and well-supervised institutions.

Countries with serious weaknesses enter a follow-up process. Those that commit to an action plan are placed under increased monitoring, commonly called the grey list. Those that do not cooperate are identified as high-risk jurisdictions subject to a call for action, the blacklist, against which members are asked to apply countermeasures.

The standards are criticized on several grounds. Evidence that they reduce the volume of laundered money is limited, while compliance costs are large. Strict application by banks has led to the withdrawal of services from whole categories of customer and from some countries, a process called de-risking that harms remittance flows and financial inclusion. Rules on non-profit organizations have been used by some governments to restrict civil society, which prompted an amendment in 2023.

• FATF: The FATF Recommendations