FATF (FATF)
The Financial Action Task Force, or FATF, is the intergovernmental body that sets the international standards for anti-money-laundering and counter-terrorist financing, assesses countries against them, and maintains the lists — informally the grey list and the black list — that drive country risk ratings across the industry.
Also called: Financial Action Task Force
FATF was established in 1989 by the G7 and now works through a membership of countries and affiliated regional bodies. Its output is the Forty Recommendations — the international template that national anti-money-laundering and counter-terrorist-financing rules are written from — together with interpretive notes, guidance, and periodic assessments of whether a member has implemented the standards and whether the implementation actually works.
Those assessments produce the lists. Countries under increased monitoring sit on what the industry calls the grey list; countries subject to a call for action make up the black list. Neither list bars anyone from doing business, but the commercial effect is immediate. Correspondent banks reprice or withdraw. Enhanced due diligence becomes mandatory for counterparties in the listed country under most national rules. Firms with exposure there find their own banking harder to keep. A listing is usually felt by a country’s legitimate businesses long before its criminals.
Much of what looks like domestic crypto regulation started here as well: the travel rule and the category of virtual asset service provider are both FATF constructions, adopted in different forms and at very different speeds from one country to the next.
In practice
FATF issues recommendations, not binding law. Nothing it publishes applies to a firm directly — the standards bite only once a country writes them into its own statutes and rules, and implementations differ enough that one recommendation can produce materially different obligations in two countries.
Example
FATF extended its travel rule to virtual assets in 2019. Years later a crypto business operating in three markets still faces three different versions of it: one country requiring full originator and beneficiary data on every transfer, one applying a threshold, one with nothing in force. Same standard, three sets of obligations.
Commonly confused with
| Term | How it differs |
|---|---|
| Travel Rule | The travel rule is one FATF recommendation about information accompanying transfers; FATF is the body that wrote it and dozens of others. |
| OFAC | OFAC is a United States agency imposing legally binding sanctions with penalties; FATF is a standard-setter with no enforcement power of its own. |
See also
- Travel RuleThe travel rule requires the firm sending a transfer to pass identifying information about the originator and the beneficiary to the firm receiving it, so that the data travels with the money. It began as a banking wire rule and now reaches virtual asset transfers as well.
- Virtual Asset Service ProviderA virtual asset service provider, or VASP, is the FATF category for a business that exchanges, transfers, safekeeps or administers virtual assets for other people, or provides financial services around their issuance. It is an international standard-setter’s term, not a license.
- Enhanced Due DiligenceEnhanced due diligence, or EDD, is the additional scrutiny applied where money laundering risk is higher. In the UK and the EU it is mandatory in prescribed cases — politically exposed persons, high-risk countries, correspondent banking — as well as wherever a firm’s own risk assessment says the baseline is not enough.
- Anti-Money LaunderingAnti-money laundering, usually shortened to AML, is the body of law, regulation and internal controls requiring financial firms to detect, prevent and report attempts to disguise the origin of criminal proceeds. It is an obligation placed on the firm, not a product the firm can buy.