Financial Action Task Force (FATF)

Founded by the G7 in 1989, the FATF now has around forty member jurisdictions, with a secretariat hosted at the OECD in Paris. Its main output is a set of Recommendations that countries turn into national law, covering criminalisation, customer checks, reporting of suspicious activity, supervision and international cooperation. The FATF has no power to fine or prosecute. Its influence comes from peer pressure: it reviews countries through mutual evaluations, publishes findings and names jurisdictions with serious weaknesses. Nine regional bodies, called FATF-style regional bodies, carry out the same work for countries outside its membership. Banks, insurers, casinos, lawyers and crypto firms meet FATF standards indirectly, through the rules their own national regulator writes. Poor ratings can lead correspondent banks and investors to reconsider a country quickly, so the standards bite despite the lack of legal powers.

A country passes a new law requiring banks to identify the real owners of companies. The change follows a mutual evaluation that found its ownership checks weak. Two years later, an assessment team visits to see whether banks actually apply the law. The result decides whether the country faces closer monitoring, and foreign banks adjust their own risk ratings accordingly.