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The prevention of money laundering and combating the financing of terrorism

Legal background

The FATF Recommendations and EU Directive

1.11 The Financial Action Task Force (FATF) is the inter-governmental body responsible for setting the international standards for anti-money laundering (AML) and countering terrorist financing (CTF). They issue recommendations which member countries should implement in order to combat money laundering and terrorist financing. These recommendations are implemented by over 190 countries.

1.12 The FATF Recommendations (The latest Recommendations are available at: http://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html.) set out the essential measures that countries should have in place to:

  • identify the risks, develop policies and provide domestic coordination
  • pursue money laundering, terrorist financing and the financing of proliferation
  • apply preventative measures for the financial and other designated sectors
  • establish powers and responsibilities for competent authorities and implement other institutional measures
  • enhance the transparency and availability of beneficial ownership information of legal persons and arrangements
  • facilitate international cooperation.

1.13 The European Union (the EU) is an economic and political union of member states which are located primarily in Europe. The EU operates through a system of supranational independent institutions and intergovernmental decisions negotiated by the EU member states.

1.14 The EU Anti-Money Laundering Directive (the EU Directive) (Directive (EU) 2015/849: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2015.141.01.0073.01.ENG.) sets out a framework which is designed to protect the European financial system against the risks of money laundering and terrorist financing and is, to a large extent, based on the international standards adopted by FATF. It requires EU member states to prohibit money laundering and to oblige the financial sector, comprising credit institutions, financial institutions and a wide range of non-financial businesses and professions (including gambling services, and casinos in particular), to identify their customers, keep appropriate records, establish internal procedures to train staff and guard against money laundering, and to report any indications of money laundering to the competent authorities. 

Next chapter: The Proceeds of Crime Act