CAMS International AML Standards and FATF 1 — Questions and Answers
Question 1: What is the Financial Action Task Force (FATF) and what is its primary role?
- A U.S. government agency that enforces AML laws domestically
- An intergovernmental body that sets international standards for combating money laundering, terrorist financing, and proliferation financing (Correct answer)
- A private sector organization that certifies AML professionals
- An international law enforcement organization that investigates money laundering cases
Correct answer: An intergovernmental body that sets international standards for combating money laundering, terrorist financing, and proliferation financing
FATF is an intergovernmental policy-making body established in 1989 that develops and promotes international standards (the FATF Recommendations) for fighting money laundering, terrorist financing, and proliferation financing.
Question 2: How many FATF Recommendations form the current international AML/CFT standard?
- 20
- 30
- 40 (Correct answer)
- 50
Correct answer: 40
The FATF 40 Recommendations (last revised in 2012 with subsequent updates) constitute the international standard for AML, counter-terrorist financing (CFT), and counter-proliferation financing.
Question 3: What is the FATF 'grey list' and what are the consequences of a country being placed on it?
- A list of countries with excellent AML regimes used as models for others
- A list of jurisdictions under increased monitoring with strategic AML/CFT deficiencies who have committed to addressing them, triggering enhanced due diligence for transactions from those jurisdictions (Correct answer)
- A confidential internal FATF assessment of member country compliance
- A list of countries that have refused to join the FATF mutual evaluation process
Correct answer: A list of jurisdictions under increased monitoring with strategic AML/CFT deficiencies who have committed to addressing them, triggering enhanced due diligence for transactions from those jurisdictions
The FATF grey list (formally 'Jurisdictions Under Increased Monitoring') identifies countries with strategic deficiencies who have committed to action plans — financial institutions typically apply EDD to transactions involving these countries.
Question 4: What is a FATF 'mutual evaluation' and what does it assess?
- A mutual agreement between countries to share AML intelligence
- A peer review process that assesses how effectively a country implements the FATF Recommendations in both law and practice (Correct answer)
- A joint investigation by multiple countries into an international money laundering network
- An evaluation of FATF's own effectiveness conducted by member countries
Correct answer: A peer review process that assesses how effectively a country implements the FATF Recommendations in both law and practice
A FATF mutual evaluation is a peer review of a member country's AML/CFT system, assessing both the technical compliance of its laws and the effectiveness of implementation in achieving tangible AML outcomes.
Question 5: The FATF Recommendations require countries to criminalize which two underlying offenses to money laundering?
- Tax evasion and fraud
- Corruption and drug trafficking
- All serious offenses generating proceeds AND terrorist financing (Correct answer)
- Cybercrime and organized crime specifically
Correct answer: All serious offenses generating proceeds AND terrorist financing
FATF Recommendation 3 requires countries to criminalize money laundering based on all serious offenses (using either an all-crimes or designated categories approach) and Recommendation 5 requires criminalizing terrorist financing.
Question 6: What is the Egmont Group and how does it relate to FATF?
- A subcommittee of FATF that drafts the annual updates to the 40 Recommendations
- An international network of Financial Intelligence Units (FIUs) that facilitates the secure exchange of financial intelligence between member FIUs (Correct answer)
- A European regional body that implements FATF standards within the EU
- A private sector group of banks that advises FATF on compliance best practices
Correct answer: An international network of Financial Intelligence Units (FIUs) that facilitates the secure exchange of financial intelligence between member FIUs
The Egmont Group is an international network of 166 FIUs (including FinCEN for the U.S.) that provides a secure platform for FIUs to exchange financial intelligence and cooperate on international investigations, complementing FATF's standards-setting role.
CAMS International AML Standards and FATF 1
What is the Financial Action Task Force (FATF) and what is its primary role?