Today Financial Crime News is publishing an exploration of the early years in fighting financial crime when in the 1980’s and the early 1990’s the follow the money approach ushered in the ant money laundering era and saw the birth of the FATF.
The recent work of the FATF (Financial Action Task Force on Money Laundering Terrorism Finance and Proliferation Finance) is well known, but how and why it was established is less well understood and indeed may even be contested. It could have been a task force to tackle offshore tax havens but instead became a task force to tackle drug money laundering focused on large industrial countries and countries with large financial centres. It’s original aims were clear, – “success will provide a decisive contribution to the fight against criminal activities, and, above all against drug trafficking, & will improve the soundness of the international financial system”.
It’s roots in Paris are strong, but they were planted by the G7 that rightly understood the conventional approach of tackling international concerns via the United Nations, through hard international law needed to be supplemented through soft law arrangements that could be promoted and where real influence could be meaningfully exerted. The FATF was not the only task force established but it’s the only one that has thrived and this early period reveals much about what the founders thought was needed and is a lens through which to judge the progress since and the lessons that can be learned by policy makers and financial crime fighters today.
It also reveals a major gap in the fight against financial crime which needs to be filled as the FATF today focusses on following the money and distances itself from the fight against the criminal activities themselves. If a financial action task force was being established today, we’d have either a financial action task force on fighting financial crime, fraud and money laundering, or one on money laundering that was part of a network of complimentary task forces that focussed on fraud and other serious financial crimes.
Based on some of the lessons learned from this article, the FATF we have today would benefit from considering 3 material adaptations. These are 1) Increased fairness and greater focus on including threat assessments in country evaluations; 2) Revisiting the FATFs overriding objective and linking future objectives into the UN SDGs including SDG 16 & 3) Increasing independence and expertise in structured ways at the new body. These adaptations would also make it a stronger contender to take this extra leadership role.
For more on suggested FATF adaptations see HERE.