Aiming to prevent global money laundering and terrorist financing, the Financial Action Task Force (FATF) was established in 1989. FATF sets international standards aimed at preventing illegal activities to protect the financial system. FATF standards are applied in more than 200 countries and jurisdictions. Additionally, FATF maintains a watchful eye on countries that pose a higher risk of financial wrongdoing and may include them in its FATF blacklist. These countries, commonly referred to as FATF blacklist countries, face strict scrutiny and pressure to enhance their anti-money laundering and anti-terrorism financing efforts. FATF members have to comply with FATF Recommendations; otherwise, countries that do not comply with certain warnings will be punished.
FATF's Risk Assessment and Risk-Based Approach
The FATF Recommendations I is concerned with assessing risks and applying a risk-based approach. Within the scope of FATF notices, countries should identify, assess, and manage money laundering and terrorist financing risks. Based on these risks, FATF countries should apply a risk-based approach (RBA) after risk assessment to prevent money laundering and terrorist financing and minimize them. The risk-based approach is the basis for countries to effectively anti-money laundering and counter-terrorist financing (AML / CFT) and implement risk-based measures throughout the Recommendations. If higher risks, such as inclusion in the FATF blacklist, are identified in countries, AML / CFT regimens should adequately manage such risks. Conversely, countries may allow simplified measures for some FATF Recommendations under certain circumstances if lower risks are identified. Under the FATF warning, countries expect the identification and evaluation of financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs) to reduce the risks of money laundering and terrorist financing.
Large corporations also carry out thousands of financial transactions per day. It isn't easy to manually control these financial transactions and apply a risk-based approach during these transactions. With the Sanction Scanner AML Transaction Monitoring tool, organizations can fulfill their AML obligations under the "risk-based approach" principle, even when dealing with FATF blacklist countries.
FATF Customer Due Diligence Procedures
Recommendation 10 is Customer Due Diligence measures. Under FATF recommendations, financial institutions should be prohibited from identifying and trading with anonymous or fictitious accounts. Some of the situations in which financial institutions should take customer due diligence (CDD) measures by the FATF recommendations are:
- when establishing business relationships
- in certain transactions, for example, transactions above the applicable specified threshold (USD / EUR 15,000)
- If any transaction is suspected of money laundering or terrorist financing
- CDD measures should be taken if the accuracy or adequacy of the customer information previously obtained by financial institutions is doubted.
With CDD measures, customers are reliably identified, and independent source documents, data, or information about the customer are used. At the same time, it ensures that the beneficial owner is determined and cautious. As a result, it is known who the customers or business partners really are, and their risks are determined. At this point, he underlined the CDD measures to reduce the risks of money laundering and terrorist financing in financial institutions.
The implementation of "Customer Due Diligence (CDD)" and "Know Your Customer (KYC)" procedures are some of the most important components of AML / CFT regulations. Customer Due Diligence measures, which are of great importance for financial institutions and FATF recommendations, require verification of customers to avoid financial crime risks. With our Sanction Scanner AML Screening and Monitoring tool, you can easily perform CDD and KYC processes following the obligations.
Identification of Politically Exposed Persons (PEPs) in terms of FATF
The FATF Recommendations 12 is Politically Exposed Persons (PEPs) relevant. Politically exposed persons (PEPs) are defined as high-risk customers who have a greater risk than ordinary citizens of acquiring assets through illegal means such as money laundering and bribery. When financial institutions establish business relationships with PEPs, more AML / CFT measures need to be implemented, and PEP must be carried out at regular intervals. PEPs pose a high risk to financial institutions and Non-Financial Jobs and Occupations (FOBIs). In addition to the Customer Due Diligence measures applied to regular customers according to the FATF recommendations, additional precautions must be taken to define the risks of PEPs. For this, FATF recommends:
- Appropriate risk systems must be in place to see if customers are PEPs.
- Senior management approval is required to establish business relationships with PEPs.
- Reasonable measures should be taken to raise funds for these individuals
- Customer relationships with PEPs should be monitored regularly.
Sanction Scanner provides Political Exposed Persons (PEPs) screening services. Sanction Scanner has an extensive global database of Sanctions, PEP, and Adverse Media. With our AML Name Screening Software for PEP Screening, you can also perform CDD and EDD measures by the obligations.
Sanction Scanner Solutions
With Sanctions and PEP Screening Service, businesses can meet their global or local AML obligations and comply with the regulations of global regulators such as FATF, including staying vigilant against dealings with countries on the FATF blacklist. As a result, it can reduce the risk of money laundering and terrorist financing and be protected from legal penalties. Through global sanctions, adverse media data, and PEP data, we offer solutions that meet the AML's needs. With our solutions such as KYC and CDD businesses can create an AML compliance program suitable for their risk levels and scan within seconds via the web, API, or batch search.
Sanction Scanner's Transaction Monitoring tool provides end-to-end features that enable you to anti-money laundering and counter the financing of terrorism obligations, regardless of your business's size and location. You can create your own rules and scenarios without any coding knowledge, so you can automatically detect high-risk and suspicious activities, even in dealings with FATF blacklist countries. This way, you can easily comply with FATF recommendations and avoid regulatory penalties. For more details, contact us or request a demo.
