This content explains the Financial Action Task Force (FATF) Methodology for assessing Technical Compliance in Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) frameworks, focusing on how countries implement specific FATF Recommendations.
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If you work in Financial Crime prevention you probably know that when FATF publish a
new country report each recommendation is provided with a Technical Compliance and
an Effectiveness rating. In the next minutes I’ll share with you the latest FATF Methodology used for assessing Technical Compliance. So let’s jump right into, today’s video!
Welcome to FinCrime Agent my channel where every week I cover a different
topic to boost your awareness about AML and Financial Crime prevention.
The technical compliance part of the FATF Methodology is about
how the specific requirements of the FATF Recommendations are carried out.
This includes the framework of laws, ways that are in place to enforce them,
as well as the presence of the national relevant authorities. We should remember here that the
Technical Compliance assessment doesn't include the particular criteria of the standards linked to
Effectiveness as those are separately included under the Effectiveness assessment.
So let’s see which are the rating for assessing Technical Compliance
that can be provided for each FATF recommendation.
Compliant, used when there are no shortcomings Largely compliant, used when There are only
minor shortcomings. Partially compliant,
used for moderate shortcomings. Non-compliant, when There are major shortcomings.
and Not applicable, this rating will be shown when a requirement does not apply,
due to the structural, legal or institutional features of a country.
So for each FATF Recommendation,
evaluators should come to a decision about how much a country meets FATF standards.
Is important to remember here that it is up to the country being evaluated to show that its
AML/CFT system is in line with the Recommendations.
When reviewing the level of compliance for each Recommendation, the evaluators should
not only look at whether laws and ways to enforce them are in line with FATF Recommendations, but
also at whether the broader framework that is required to be compliant is in place.
Let’s now talk about the weighing element considered when assessing Technical Compliance.
But before we do that if you are finding
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Technical Compliance weighting So, how evaluators manage to put
a weighing when assessing Technical Compliance. First of all, not all of the criteria used
to evaluate each FATF Recommendation are equally important, and the mathematical count of criteria
assessed as “met” does not always necessarily reflect how well each Recommendation is followed.
There is of course also a qualitative element to keep in mind. So when deciding how to rate each
Recommendation, evaluators should think about how important each requirement is
in the context of that specific country. More specifically is recommended that evaluators
look at the country's risk profile and other relevant information
to figure out how pertinent identified issues actually are.
Even if all the other criteria are met, there may be times when a single weakness is important
enough to warrant a Non Compliant rating. So essentially the context element is
key for evaluators to ensure the correct weighting will be applied. Le’s now see what happens when an issue is
touching more than one recommendation. In several instances, the same underlying problem can have a
ripple effect on how other Recommendations are evaluated. To make an example:
If AML/CFT rules aren't applied to a certain kind of financial institution or DNFBP, it could
change how all FATF Recommendations that apply to financial institutions or DNFBPs are assessed.
In these situations, while reviewing ratings, evaluators should take into account any
deficiencies in the underlying criteria for each relevant recommendation and, if necessary,
mark them clearly in their rating. So to ensure clarity, when a shared underlying problem is
applicable it should be explicitly stated in the MER across all relevant Recommendations.
To close this overview on assessing Technical
Compliance I lastly want to highlight that the ratings given under this latest Methodology
is not directly comparable with those ratings given under the old 2004 FATF Methodology.
This is due to the revision and consolidation of the FATF
Recommendations and Special Recommendations that was implemented in 2012 as well as the
introduction of separate assessments for technical compliance and effectiveness.
I am in fact going to cover the FATF Methodology for assessing the effectiveness
in my next video and I will leave you a link to this second part in the video description.
So that’s all for today. If you are finding valuable my content, press the thumb up and
leave a comment. Also check the video description for useful links and to support me on Patreon.
Lastly, thank you for watching, I hope you enjoyed today’s video and until next time: See you soon!
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