Anti-Money Laundering and CFT Overview

Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT)

• The Financial Action Task Force (FATF) is the main international body responsible for setting global standards for AML and CFT.
• The key objective of AML regulations is to prevent financial system misuse by criminals, ensuring integrity in financial markets.
• Proliferation financing refers specifically to funding that supports the development and spread of nuclear, chemical, or biological weapons.
• Suspicious Activity Reports (SARs) play a crucial role in AML/CFT by notifying authorities of potential money laundering or terrorist financing activities.

Red Flags and Focus Areas

• Transactions that raise red flags for money laundering often include large cash deposits broken into smaller amounts to avoid detection.
• The focus of proliferation financing controls is on stopping the funding of weapons of mass destruction development and acquisition.

FATF Recommendations

• The FATF 40 Recommendations outline measures for preventing, detecting, and combating terrorism financing and proliferation of weapons of mass destruction.
• The primary purpose of the FATF’s 40 Recommendations is to establish international standards against money laundering and terrorist financing.
• Areas not directly covered by the FATF's 40 Recommendations include international trade tariffs, ensuring the focus remains on AML/CFT strategies.
• Recommendation 16 specifically addresses wire transfers, mandating the inclusion of originator and beneficiary information.

Financial Institutions' Role

• Financial institutions must implement robust AML/CFT measures and report suspicious activities as part of their responsibility in combating money laundering and terrorist financing.
• FATF Recommendation 1 emphasizes that countries should identify and assess their money laundering and terrorist financing risks to develop effective strategies.

Designated Non-Financial Businesses and Professions (DNFBP)

• DNFBP stands for Designated Non-Financial Businesses and Professions, highlighting sectors that also play a critical role in AML/CFT frameworks.
• FATF Recommendation 11 mandates that financial institutions maintain records of all transactions for a minimum of five years to ensure traceability.