The Financial Action Task Force (FATF) is an independent body consisting of certain recommendations to design a law that must be capable of implementation and can govern against money laundering. It is implemented globally and thirty-nine countries are members of FATF.
Kingdom of Bahrain is a part of FATF through Gulf Co-operative Council. This is an infrastructure that helps the international authorities to co-operate their forces against financing terrorism mutually.
Although the FATF is based on comprehensive notes of almost 100 plus pages, this article is designed to reach you out with the main important points that are highlighted in less than five pages.
History of FATF:
FATF was first formed during a summit in Paris in the year 1989 to take some measures for fighting money laundering and drug trading. After the incident of 9/11, they also added policies regarding terrorism funding. After that, it was updated in the year 2012 to combat weapon trafficking and to prevent the massive destructive terrorist plans.
FATF aims to detect the loopholes in the financial infrastructure at the global level, to prevent financial crime.
Forty Recommendations on Terrorism:
The FATF hubs have its main guidelines around forty set of recommendations, but, the main points are highlighted below:
1. The first important thing is to the gaps in the policies of your country that puts specific threats of money laundering.
2. The policies must be drafted and then implemented to counter the emphasized threats. The policies must be drafted to protect the country from crimes such a drug trading, weapon trafficking, money laundering, and financing crime.
3. The countries must design a framework to prevent the risk affiliated to the financial institutions. The design is framed under AML (Anti-Money Laundering and CFT (Counter Financing of Terrorism).
4. These precautionary measures must have the following points:
Monitoring of transactions.
Screening of the customers under AML obligations.
Keeping the record.
5. The law enforcement in the country must have the authorities to implement laws and take hold of the reporting entities which are involved in the preventive measures.
6. There must be accountability from top to bottom levels in the system of the country while maintaining a fair jurisdictive atmosphere.
How can businesses be affected?
The FATF recommendations are very helpful to eliminate the gaps which invite money laundering by the criminals but still, it has its cons. The business class that owns the markets in the country faces difficulties by the rules and regulations which are followed under the supervision of the recommendations given by FATF.
Following are some of the implementations on businesses provided by the recommendations of FATF:
1. The first implementation is that they are required to accomplish due diligence on the customers.
2. Implementing the screening on businesses under AML obligations.
3. They must keep a record of their customer's data.
4. They must maintain a department related to compliance.
5. They must report to the law enforcement authorities in case they feel any suspicion about the transaction of their customers.
6. AML screening is a must on ultimate beneficial owners in the situation of helping business as a consumer.
The effects of these AML recommendations are in two ways which enhance the force against money crime in the country. The first thing is that the policies of the country are sketched under the frame of these recommendations, and then these recommendations are implemented to the reporting bodies.
One other important thing to note is that these are implied to all old and new business startups. In case the recommendations are updated, the policies will be updated directly. And then they will be implemented for all the businesses.
So, businesses are highly affected by FATF, they have to take preventive measures to keep the record of their profits and loss by taking a detailed look at their customers.
Members of FATF:
It is not an easy task to be a member of FATF. There are only thirty-nine countries worldwide that are members. Only those countries can be a part of FATF which are at low risk of money laundering and financial crime.
Countries that are members of FATF help them to be a low-risk area for investments. This allows the citizens to grow their businesses at a rapid pace in the countries which are at low risk of money laundering. Some areas are to be marked as grey as they are facing high risks of money laundering and most of the investors hesitate to start businesses in such areas. Additionally, the growths of businesses in such areas are very slow.
FATF in Bahrain
Bahrain is a member of the Gulf Co-operation Council (GCC). The GCC is a member of the FATF. There is strict law enforcement in Bahrain to combat money laundering, financial crime, weapon trafficking, and drug trafficking.
The law in Bahrain to fight against money crime has been designed under the recommendations of FATF which helps the country by making it a low-risk area for investments. This has positively promoted Bahrain regarding the corporate sector. This makes Bahrain very important worldwide on the map of marketing and trade. Although the more the wealth is, there are more chances of financial crimes. But most of the rich countries are members of FATF to protect the legal money and prevent black marketing.
FATF is a body of principles that are set to fight against money laundering, financial crimes, drug trading, and weapon trafficking. It is implemented globally. There are around thirty-nine countries that are members of FATF.
It has been centered around 40 recommendations that provide guidelines to empower the law enforcement of the countries to help them fight financial crimes and terrorist funding. AML regulations use artificial intelligence to screen and monitor customers through automated processing as manual screening can be very difficult and may leave loopholes for the criminals to attack.
FATF is the best possible solution for the countries globally to prevent the attack of financial infrastructure globally. It helps to promote businesses and create more opportunities.
Countries that are members of FATF are in low-risk areas for businesses that invite investors and help the country grow.