The Financial Action Task Force (FATF) is the most important international body for standards to combat money laundering and terrorist financing. Its recommendations shape compliance requirements worldwide – including in the DACH region.
Note: This information is for general guidance and does not constitute legal advice. Implementation of FATF recommendations into national law varies. For specific compliance questions, consult specialized advisors.
What Is the FATF?
Organization
| Aspect | Detail |
|---|---|
| Name | Financial Action Task Force (Groupe d'action financiere) |
| Founded | 1989 (G7 initiative) |
| Headquarters | Paris (OECD) |
| Members | 38 member countries + 2 regional organizations |
| DACH membership | Germany, Austria, Switzerland are members |
Tasks
| Task | Description |
|---|---|
| Standard setting | Recommendations for combating money laundering |
| Country assessments | Mutual evaluations of members |
| Blacklist/Greylist | Identification of high-risk countries |
| Typologies | Analysis of new money laundering methods |
The 40 FATF Recommendations
Structure
The FATF recommendations are organized into thematic blocks:
| Block | Recommendations | Topic |
|---|---|---|
| A | 1-2 | AML/CFT policies and coordination |
| B | 3-4 | Money laundering and confiscation |
| C | 5-8 | Terrorist financing |
| D | 9-23 | Preventive measures |
| E | 24-25 | Transparency of legal persons |
| F | 26-35 | Powers of authorities and institutional measures |
| G | 36-40 | International cooperation |
Core Elements for Companies
| Recommendation | Topic | Relevance |
|---|---|---|
| 10 | Customer due diligence (CDD) | KYC processes |
| 11 | Record-keeping | Documentation |
| 12 | Politically exposed persons (PEP) | Enhanced scrutiny |
| 20 | Suspicious transaction reports | Reporting obligations |
| 24 | Transparency of legal persons | UBO identification |
Customer Due Diligence (Recommendation 10)
Core Requirements
| Obligation | Content |
|---|---|
| Identification | Identify and verify customer |
| UBO identification | Determine ultimate beneficial owners |
| Purpose of business relationship | Understand and document |
| Ongoing monitoring | Monitor transactions |
Risk-Based Approach
| Risk level | Measures |
|---|---|
| Low risk | Simplified due diligence possible |
| Normal risk | Standard CDD |
| High risk | Enhanced due diligence (EDD) |
The FATF emphasizes the risk-based approach: Resources should be concentrated where risks are highest.
Transparency and UBO (Recommendation 24)
Requirements
| Aspect | Requirement |
|---|---|
| Access to information | Authorities must be able to obtain UBO data |
| Registers | Recommendation for central registers |
| Timeliness | Information must be current |
| Verification | Mechanisms for verification |
Implementation in the DACH Region
| Country | Transparency register |
|---|---|
| Germany | Transparency Register (electronic) |
| Austria | Beneficial Owners Register (WiEReG) |
| Switzerland | No central register, but reporting obligations |
Country Risk Assessment
FATF Lists
| List | Meaning |
|---|---|
| High-Risk Jurisdictions (Blacklist) | Strategic deficiencies, countermeasures required |
| Jurisdictions under Increased Monitoring (Greylist) | Deficiencies, enhanced monitoring |
Consequences for Companies
| Business partner country listing | Required measures |
|---|---|
| Blacklist | Enhanced due diligence, possibly rejection |
| Greylist | Increased attention, EDD |
| Not listed | Normal risk-based approach |
FATF Mutual Evaluations
Assessment Process
The FATF regularly evaluates its members on implementation of the recommendations:
| Phase | Content |
|---|---|
| Technical compliance | Are laws in place? |
| Effectiveness | Do the measures work? |
| Follow-up | Implementation of improvements |
DACH Evaluations
All three DACH countries have been evaluated by the FATF. The reports are publicly available and show strengths and areas for improvement.
Relevance for Companies
Obligated Entities Under National Law
FATF recommendations are primarily directed at states that implement them into national law. Typically obligated sectors:
| Sector | Examples |
|---|---|
| Financial sector | Banks, insurance, securities trading |
| Goods dealers | High-value goods, art |
| Real estate agents | Property transactions |
| Legal professions | Lawyers, notaries (for certain activities) |
| Tax advisors/auditors | For certain activities |
Indirect Effects
Companies not directly obligated are also affected:
| Effect | Example |
|---|---|
| Bank requirements | Banks ask about compliance measures |
| Business partner inquiries | Due diligence by partners |
| Supply chain audits | Sanctions compliance in the chain |
FATF Recommendations and KYC
Know Your Customer (KYC)
The FATF recommendations form the basis for KYC processes:
| FATF requirement | KYC implementation |
|---|---|
| Customer identification | Identity documents, register extracts |
| UBO identification | Shareholder research |
| Understand purpose | Business model analysis |
| Ongoing monitoring | Transaction surveillance |
Documentation
| Requirement | Implementation |
|---|---|
| Record-keeping | At least 5 years after business relationship |
| Availability | Accessible to authorities |
| Completeness | All verification steps documented |
Current Developments
New Topic Areas
| Topic | FATF activity |
|---|---|
| Virtual assets | Recommendations for cryptocurrencies |
| Proliferation financing | Weapons of mass destruction |
| Environmental crime | Money laundering from environmental offenses |
| Cybercrime | Digital money laundering |
Travel Rule for Crypto
The FATF requires that sender and recipient information be transmitted for virtual asset transactions – analogous to traditional payment transactions.
FATF and Sanctions
Differentiation
| Aspect | FATF | Sanctions |
|---|---|---|
| Focus | Money laundering, terrorist financing | Foreign policy goals |
| Legal character | Recommendations (soft law) | Binding law |
| Implementation | Via national law | Directly applicable (EU regulation) |
Overlaps
Both areas require: - Knowledge of business partners - List screening - Documentation
An integrated compliance solution often covers both areas.
Implementation in Companies
Risk-Based Approach
| Step | Content |
|---|---|
| Risk analysis | Assess own risks |
| Define measures | According to risks |
| Allocate resources | Focus on high-risk areas |
| Review | Regular adjustment |
Compliance Program
| Element | Description |
|---|---|
| Policies | Written guidelines |
| Training | Sensitize employees |
| Controls | Check compliance |
| Reporting | Reporting system |
Resources
FATF Publications
| Publication | Content |
|---|---|
| FATF Recommendations | The 40 recommendations |
| Methodology | Assessment criteria |
| Mutual Evaluation Reports | Country reports |
| Guidance | Interpretation guides |
| Typologies | Money laundering methods |
National Implementation
| Country | Main law |
|---|---|
| Germany | Money Laundering Act (GwG) |
| Austria | Financial Market Money Laundering Act (FM-GwG) et al. |
| Switzerland | Money Laundering Act (GwG) |
Conclusion
The FATF recommendations set the international standard for combating money laundering. They form the basis for national laws such as the German GwG and thus influence compliance requirements for obligated companies.
The risk-based approach is central: Companies should deploy resources where risks are highest. Regular country assessments (mutual evaluations) ensure implementation goes beyond paper.
For practical compliance, this means: KYC processes, UBO identification, and transaction monitoring following the principle of "Know Your Customer."
Screen business partners: With Firmium, you receive company data for your compliance checks.