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FATF Review of Gatekeepers’ Technical Compliance Related to Corruption

09/07/2024

Through their role as gatekeepers to the financial system, non-financial professionals can facilitate, unwittingly or wittingly, high-level corruption.

  • Corruption and money laundering are inextricably linked.
  • Corrupt actors must launder bribes and misappropriated funds to enjoy their criminal profits.

To minimise such risks, the FATF took action over 20 years ago by requiring countries around the globe to apply AML/CFT measures to gatekeepers –

  • Lawyers,
  • Accountants,
  • Trust and company service providers, and
  • Real estate agents.

These measures aim to address the vulnerability of the sectors to money laundering and corruption threats, by equipping professionals with the necessary know-how to detect indications of possible crimes.

When these professionals are not regulated in accordance with the FATF Standards, they remain exposed to significant criminal risks and lack those measures that would allow them to see the red flags of money laundering.

The FATF has undertaken this Horizontal Review to assess the current state of play and identify areas that FATF members must prioritise for further improvement. This is a deep dive into the actions that FATF members have taken to apply important aspects of the FATF Recommendations to gatekeepers.

On the surface, the Horizontal Review of Gatekeepers’ Technical Compliance Related to Corruption shows positive results –

  • Over half of FATF members have scores over 80%.

However, these results are less promising when one considers the context and materiality of

  • The seven FATF members falling below the score of 50%. These jurisdictions represent more than half of the world’s GDP.

Although it is a common perception that the legal profession is subject to fewer AML/CFT rules than other gatekeeper sectors, the Horizontal Review found little difference in coverage scores of the four gatekeeper sectors under the scope of the review - lawyers, accountants, trust and company service providers, and real estate agents.

Finally, this review found that some cornerstone obligations of the FATF Recommendations fall behind the compliance levels of other obligations.

These requirements—conducting customer due diligence, implementing internal controls, and providing a supervisor with adequate powers to conduct risk-based supervision—are essential requirements to address the vulnerability of gatekeepers to money laundering and corruption threats.

It is urgent that those FATF members still lagging ensure that gatekeepers are adequately covered in line with the FATF’s longstanding Recommendations in this area.

Source

FATF

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