The Financial Action Task Force (FATF) is the intergovernmental body, established in 1989 and headquartered in Paris, that sets international standards for combating money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. Its core output is the FATF 40 Recommendations, a global framework that member states, including the UK, a founding member, translate into domestic law. The UK’s Money Laundering Regulations 2017 are substantially shaped by these Recommendations.
Why FATF matters
FATF has no direct legal authority over UK firms, but its influence is profound. Its Recommendations define what an effective AML/CFT regime looks like, and its mutual evaluations assess how well countries comply. A poor FATF assessment can affect a jurisdiction’s standing in the global financial system. For firms, FATF’s identification of high-risk jurisdictions has direct operational consequences.
How FATF lists drive due diligence
FATF maintains two key lists: jurisdictions subject to a call for action (the “black list”) and jurisdictions under increased monitoring (the “grey list”). Where a customer or transaction involves a high-risk third country, UK firms must apply enhanced due diligence under Regulation 33 of the MLRs 2017. The UK maintains its own list of high-risk third countries, closely aligned with FATF’s, in Schedule 3ZA to the Regulations.
Who it applies to
FATF standards reach all firms in the UK regulated sector through the MLRs 2017, with the strongest practical impact on those handling cross-border business or customers connected to listed jurisdictions.