Financial Action Task Force (FATF)

If you have ever traveled abroad and found that certain ATM cards didn’t work or that transferring money to a specific country required a mountain of extra paperwork, you have likely encountered the influence of the FATF.

The Financial Action Task Force (FATF) is the global body for money laundering and terrorist financing. Established in 1989 by the G7, this intergovernmental body sets the international standards that aim to prevent illegal activities and the harm they cause to society. It doesn't write laws itself; instead, it creates a global gold standard that over 200 countries and jurisdictions are committed to implementing.

What the FATF does

Think of the FATF as the global setter of the financial health code. Just as a health inspector ensures every restaurant follows the same hygiene rules to prevent illness, the FATF ensures every country follows the same financial rules to prevent crime.

The FATF’s work is centered around its 40 recommendations. These cover everything from how a bank should verify a customer's identity (KYC) to how governments should confiscate the proceeds of crime.

• Setting the standards: The 40 recommendations are the baseline for Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) efforts worldwide.

• Mutual evaluations: The FATF periodically audits countries to see how well they are following the rules. These peer-reviewed reports can significantly impact a country’s reputation and its ability to participate in the global economy.

• Identifying high-risk jurisdictions: This is perhaps the FATF’s most visible tool. It maintains two lists that alert the financial world to countries with weak controls.

The Black List vs. The Grey List The FATF’s lists act as a global signaling system for risk. For fintechs and banks, these lists dictate how much due diligence is required when dealing with certain regions.

List	Official name	What it means	Impact on business
Black List	High-Risk Jurisdictions subject to a Call for Action	Countries with serious strategic deficiencies who are not actively cooperating.	Often results in severe economic sanctions and a total "stop" on most financial transactions.
Grey List	Jurisdictions under Increased Monitoring	Countries that have committed to resolve the identified strategic deficiencies and are working with the FATF to be monitored closely.	Requires Enhanced Due Diligence (EDD). It doesn't mean you can't do business there, but you must look much closer.

FATF in the digital age

The FATF doesn't just look at traditional banks. As finance goes digital, the FATF has evolved to cover:

1. Virtual assets (Crypto):

The "Travel Rule" is a famous FATF recommendation (Recommendation 16) that requires crypto exchanges to share sender and receiver information for transactions, much like traditional wire transfers.

2. Beneficial ownership:

The FATF pushes for transparency so that criminals cannot hide behind shell companies. These are businesses that exist only on paper and have no real office or employees. FATF mandates that authorities (and often businesses) should be able to see who actually owns and controls a business (KYB).

3. Financial inclusion:

Under the 2024–2026 Mexican Presidency, the FATF is focusing on ensuring that strict AML rules don't accidentally push legitimate, vulnerable people out of the banking system. If rules are too fixed, banks may deny services to those who lack traditional documentation, unintentionally cutting them off from the modern economy.

Interesting facts

• Originally, the FATF only focused on money laundering. After the September 11 attacks, its mandate was expanded to include the fight against terrorist financing.
• The requirement for information to travel with a payment wasn't invented for crypto; it was a standard for bank wire transfers for decades before being applied to the blockchain in 2019.
• Much like the EBA, the FATF is headquartered in Paris, operating out of the OECD headquarters.

Further reading

To understand how these global standards are applied in the EU, see our entries on Anti-Money Laundering (AML) and Know Your Business (KYB). You can also find the latest list of monitored countries on the official FATF website.