In 2012 FATF commenced its 4th round of mutual evaluations, which was different in approach from the previous mutual evaluation exercises (40 recommendations + 9 special recommendations) as it now focused on technical compliance with the FATF Recommendations, and whether the country’s AML/CFT system is effective. Therefore, the Methodology comprises two components:
The technical compliance assessment addresses the specific requirements of the FATF Recommendations, principally as they relate to the relevant legal and institutional framework of the country, and the powers and procedures of the competent authorities. These represent the fundamental building blocks of an AML/CFT system.
The effectiveness assessment differs fundamentally from the assessment of technical compliance. It seeks to assess the adequacy of the implementation of the FATF Recommendations, and identifies the extent to which a country achieves a defined set of outcomes that are central to a robust AML/CFT system. The focus of the effectiveness assessment is therefore on the extent to which the legal and institutional framework is producing the expected results.
Although the old method of Mutual Evaluations is no longer being undertaken, these are the only ones available for countries who have not yet undertaken the 4th round Mutual Evaluation and , therefore, they can be useful with regard to assessing a country’s AML/CFT regime. However, the issues with the old methodology were: -
- Focus on formal compliance of pre-defined standards - Little emphasis on outcome effectiveness
- Repeat violations of AML/CFT regimes in deemed 'AML effective' countries seemingly ignored
- Levels of corruption & illicit money flows ignored