What is the FATF?

What Does FATF Stand For?

The Financial Action Task Force (FATF) is an international group; it was set by the G7 countries in 1989 to detect and fight money laundering and terrorist financing. In 2025, FATF works with more than 200 countries and implements rules for them. FATF regulates mostly with the 40 Recommendations it’s created; these rules are followed by countries to build their own AML and KYC laws. In this blog post, we’ll give more details about the important regulatory body that is FATF.

What Is the Purpose of FATF?

Let’s talk more about FATF. What is the reason for FATF to operate and why should our readers care? The main purpose of the FATF is to work towards a world where money laundering and terrorist financing is stopped by the rules they set. FATF is also tasked with cross-border operation; they help different countries share information and work together when there is need. Another reason why the FATF operates is to investigate and identify countries that aren’t meeting its standards. These countries are then put to lists known as grey lists and blacklist; these lists are there to put pressure on the countries on the said lists to improve their AML and CFT laws and regulations.

What Are the 40 FATF Recommendations?

Despite talking about the main reasons why FATF operates, we haven’t discussed the FATF’s most important creation, also known as 40 Recommendations of FATF. These recommendations are the rulebook for battling against money laundering and terrorist financing. It’s clear from going through them that these recommendations are put in place to cover a wide range of crimes and how to prevent them. Customer due diligence (CDD) and using a risk-based approach during onboarding to ensure you are onboarding safe and real people who are then divided to categories accordingly to be continuously monitored are some of the examples for these recommendations.

Another recommendation FATF supports is the transparency around beneficial ownership, it’s important to know who the ultimate beneficial owners (UBOs) are to leave no space for crimes. Sanctions implementation is also equally important as pointed out by the FATF; this feature makes sure that countries are ready to take action against companies or individuals who might be linked to financial crimes. One other recommendation we can talk about is the push for more regulations for virtual asset service providers (VASPs); these companies like crypto firms are newer and more vulnerable to crimes like digital assets being used illegally.

What Is the FATF Methodology and Evaluation Process?

As we’ve mentioned above, FATF sets lots of rules for countries to follow, but that’s not all. Afterwards, checking if the countries are actually following these rules is another duty of the FATF. This is done by doing something called the mutual evaluation process, the FATF reviews different countries’ AML and CFT systems during this part. What the evaluation focuses on is the technical compliance first; FATF checks if the said country has the right laws, and effectiveness; which uses FATF’s 11 Immediate Outcomes to check whether these rules work in practice. One other part of FATF’s process is making sure countries apply a risk-based approach to figure out the high-risk areas of the said country.  If the said country fails to comply with all these FATF regulations, they may end up in the FATF grey list, like South Africa and Nigeria has, or blacklist afterwards, like Iran and North Korea; being in these lists mean your country is watched closely, and it has economic and reputational repercussions.

Who Are the Members of FATF?

Since FATF compliance is important for the reasons we’ve mentioned above, the regulatory body has many members. Currently in 2025, FATF has 37 members, some of these countries, for example, are the US, the UK, Germany, India, and more. FATF involves two regional bodies named the European Commission and the Gulf Cooperation Council (GCC). There are more than 200 jurisdictions worldwide that follows FATF standards other than the immediate members.

What Is the FATF Grey List and Blacklist?

If a country fails to comply with all FATF regulations we’ve mentioned before, they may end up in either the FATF grey list or worse, the blacklist. As of June 2025, British Virgin Islands and Bolivia to its Jurisdictions Under Increased Monitoring list, also known as thre FATF grey list, while removing Crotia, Mali, and Tanzania because of their improvements in compliance.

According to Moneycontrol.com Pakistan could once again be placed on the FATF grey list if unregulated digital transactions are not brought under a proper legal and supervisory framework, the country's Finance Minister Muhammad Aurangzeb warned in August, 2025.  This shows that getting out of the grey list is not forever if your country doesn’t stay consistent with compliance.

How Is FATF Different from Other Global Bodies?

Also as of June 2025, the High-Risk Jurisdictions Subject to a Call for Action list is still the same. The list, also known as the blacklist, consists of Iran, North Korea, and Burma. The FATF specifically encourages jurisdictions to apply countermeasures towards Iran and North Korea. However, even though it is still under enhanced due diligence, Burma is not being the subject of countermeasures. 

On the subject of what puts countries in the blacklist, FATF President Elisa de Anda clarifies using Russia, who is actively in war with Ukraine, as an example. The president says, “The suspension of the Russian Federation, which is unprecedented, is different than any process of greylisting or blacklisting”. Russia taking part in meetings as a member and similar actions are prohibited since Russia is suspended, but the president clarifies that only identified financial system deficiencies can cause a country to enter the grey list and blacklist, AML Intelligence reported. 

Why Is FATF Important for Banks and Regulated Entities?

The FATF regulations are extremely important for banks and other regulated firms since the regulations make sure they are operating according to the laws. FATF rules come with AML and KYC obligations; banks, fintechs, and crypto firms must conduct strict checks on consumers and transactions. We at Sanction Scanner would like to highlight the importance of conducting these checks regularly.

Another way the FATF guidelines affect companies is by licensing; financial firms and birtual asset service providers (VASPs) are expected to comply with FATF standards before they can get or renew their licenses by regulators. Our final example for how FATF affects companies is the expentance of regulatory audits and compliance risk assessments set by the FATF. These acts make sure that your company is safe from fines, reputational damage, or beig potentially sanctioned.

FATF and Cryptocurrency: What Are the Expectations?

We’ll talk more about how FATF guidelines shape how crypto firms operate. The first rule enforced by the FATF is the Travel Rule; this rule requires crypto firms and VASPs to share customer identification and transaction details when funds are transferred between platforms. Another expectation by the FATF is wallet verification by KYC checks; this is done to make sure that the customer’s identification details are real and accurate. Blockchain monitoring is also highlighted by the FATF to help crypto firms spot odd patterns in the digital asset transaction process. These standards by FATF help influence regulations like the MiCA framework in the EU and the FinCEN regulations in the U.S.

How Is FATF Different from Other Global Bodies?

Since we’ve talked extensively about the FATF, you might be wondering how this regualtory body is different from some other examples. FATF is the regulatory body that is tasked with fighting money laundering and terrorist financing; FATF’s rules aren’t legally binding for companies and countries, but without them, countries can get into the grey list or blacklist since they don’t comply with the regulations. One example we can give to highlight the difference is the IMF. This regulatory body can make its requirements legally binding when financial assistance or loans are the case and it’s important for macroeconomic policy. Another regulatory body to compare with FATF is the UN. The UN deals mainly with international sanctions; the resolutions they reach are legally binding for member states. The Egmont Group, however, is not legally binding; this regulatory body is known for bringing FIUs around the world together and information sharing between them.

What Happens If a Country Doesn’t Comply with FATF Standards?

As we’ve mentioned above, the first risk you may have from non-compliance is your country landing in the FATF grey list or blacklist. Lebanon, in October 2024, was placed in the FATF grey list after its ongoing economic crisis since 2019. A two year action plan was implemented by the Lebanon government to hopefully get out of this list as soon as possible. 

De-risking by banks is another consequence your company may face. This means that already existing relationships may be terminated after non-compliance. To give another example about greylisting, after South Africa entered the list in 2023, some European and Asian banks responded by putting out stricter rules for the whole process.  Lower credit ratings are similarly expected when your country is faced with non-compliance. Operating with lower credit rating is harder since you need higher credit ratings for borrowing money your country needs. To give the example of South Africa again, after entering the greylist in 2023, the reputational damage it experienced has led to higher financing costs. 

Since the non-compliant country is not as trustworthy anymore, trade can also get blocked and suffer. Trade can get affected by the stricter due diligence demands and higher transaction costs. We can see this from the UAE’s recent changes. After the FATF’s decision to take the UAE out of the grey list after a year in 2023, the country’s trade efforts were made easier. 

How Can Companies Stay Compliant with FATF Standards?

To make sure your company can reach compliance according to FATF standards, you should be investing in strong processes that control risk and ensure transparecy. Risk based onboarding is the first right step for compliance; this step makes sure you are assessing your new customer based on several information like their background info, location, and more. 

Ongoing monitoring of both customers and transactions is needed to ensure that no illegal activities are allowed within your company. To support ongoing monitoring, regular checks of PEP and sanctions lists is helpful for catching these individuals. Employee training is needed to ensure your company works with the expertise your employees possess. In case of an odd activity, your company should be able to file STRs immediately and keep the records afterwards.

How Can Sanction Scanner Help with FATF Compliance?

We at Sanction Scanner provide sanctions screening for our readers who wish to reach compliance; this feature of our tools is there to make sure you aren’t working with any sanctioned company or individual. With our team’s PEP and adverse media checks, you’ll know if any of your customers are of high-risk or riddled with negative news. Finally, one of our many helpful features we’ll mention to you in this piece is transaction monitoring. With our team’s expertise in making sure your company receives ongoing transaction monitoring, you will never allow fraudsters to make suspicious transactions using illicit funds.