Financial Action Task Force (FATF)

There are 39 members listed in FATF’s list as of 2024. This number includes individual countries and the European Commission and the Gulf Co-operation Council as entities. However, the FATF suspended membership of the Russian Federation on 24 February 2023. 

Once a member, a country or organization must endorse the latest FATF Recommendations and collaborate on developing future standards. In general, to qualify for its membership, a country must be well-developed, which typically involves having a large population, substantial GDP,  and active participation in major global organizations.

FATF’s issued global standards, also known as the FATF Recommendations, is a unified rulebook for an effective approach to combating organized crime, corruption, and terrorism. Here’s a quick timeline of the organization’s work:

• 1990. The FATF has released 40 initial recommendations specifically targeting money laundering, all initially introduced in 1990. 
• 2001. The FATF issued nine special recommendations focused on combating the financing of terrorism.
• 1996. The FATF updated its general recommendations to reflect evolving money laundering trends and address potential future threats.
• 2003. An updated version of the original 40 Recommendations was presented.

On June 21, 2019, the FATF identified virtual assets (VAs) as one of the primary threats to financial integrity, issuing a public statement with its important guidance for a Risk-Based Approach (RBA) to VAs and virtual asset service providers (VASPs).

In its Recommendation 15, FATF further explained how this approach applies to VAs and VASPs. Recommendation 16 expanded the Travel Rule to include VAs and VASPs. Together, these changes significantly altered the regulatory landscape for the cryptocurrency and digital asset industry starting in 2020, clarifying the application of FATF Recommendations to VAs and VASPs.

A virtual asset (VA) is a digital representation of value that can be traded, transferred, and used for payment or investment. Virtual assets exclude digital versions of fiat currencies, securities, or other financial assets, which are addressed separately in the FATF Recommendations.

The FATF has a “blacklist” and “greylist” of countries that don’t comply with its recommendations. Countries on these lists often face severe financial repercussions, including lower bond ratings and difficulty accessing the international banking system.

Consequently, companies should be aware of which countries are on these lists and understand the implications of such classifications due to the regulatory risks involved with non-compliance.

According to FATF’s “Report on the State of Effectiveness and Compliance with the FATF Standards,” 76% of countries meet the FATF’s 40 Recommendations effectively. Compared to previous results of 32% in  2012, this change highlights the positive impact of the FATF’s follow-up procedures and general efforts to combat crime.