International AML Standards and FATF Flashcards

What is 'correspondent banking' under FATF standards, and what specific Recommendation addresses it?

Answer: Recommendation 13, requiring financial institutions to apply specific EDD measures for cross-border correspondent banking relationships, including assessing the respondent's AML controls

FATF Recommendation 13 specifically addresses correspondent banking, requiring institutions to gather information about the respondent institution's AML/CFT controls, assess its regulatory status, and obtain senior management approval before establishing high-risk correspondent relationships.

What is the FATF 'black list' (formally the 'High-Risk Jurisdictions Subject to a Call for Action')?

Answer: The highest-risk category of FATF's country assessments, identifying jurisdictions with severe AML/CFT deficiencies where FATF calls on all member countries to apply counter-measures

The FATF black list (High-Risk Jurisdictions Subject to a Call for Action) currently includes jurisdictions like North Korea and Iran, where FATF calls for counter-measures beyond EDD, including restrictions on financial relationships.

How has FATF addressed the AML risks associated with Designated Non-Financial Businesses and Professions (DNFBPs)?

Answer: FATF extended its AML Recommendations to DNFBPs including lawyers, accountants, real estate agents, and dealers in precious metals, requiring them to implement AML controls similar to financial institutions

FATF Recommendations 22-23 extend key AML requirements (CDD, record-keeping, suspicious transaction reporting) to DNFBPs because criminals exploit these sectors to launder money outside the traditional financial system.

What is 'proliferation financing' and how does FATF address it?

Answer: The provision of funds to persons or entities involved in the development, manufacture, or acquisition of weapons of mass destruction, addressed through FATF Recommendation 7 and targeted financial sanctions

Proliferation financing involves funding the development or acquisition of weapons of mass destruction (nuclear, chemical, biological, radiological) — FATF Recommendation 7 requires countries to implement targeted financial sanctions against proliferators without delay.

Under the FATF framework, what is the difference between 'technical compliance' and 'effectiveness' in a mutual evaluation?

Answer: Technical compliance measures legal framework quality; effectiveness measures whether that framework produces real-world AML outcomes

Technical compliance assesses whether a country's laws and regulations meet FATF's requirements, while effectiveness assesses whether the system actually achieves the intended AML outcomes — a country can have good laws but poor implementation.

What is the role of the U.S. Financial Intelligence Unit (FIU), FinCEN, in the international FATF framework?

Answer: FinCEN serves as the U.S. FIU and FATF member, administering the BSA reporting system, exchanging intelligence through the Egmont Group, and representing U.S. AML interests in international standard-setting

FinCEN is both the U.S. FIU (a member of the Egmont Group) and the U.S. representative to FATF, playing a dual role in operational intelligence sharing internationally and in shaping the global AML standards framework.