Mutual Evaluation Report (MER)

Evaluators drawn from other member countries study a country's laws, then visit it and interview agencies, regulators and private firms. The report has two parts. Technical compliance checks whether the law meets each FATF Recommendation, and is rated from compliant to non-compliant. Effectiveness looks at eleven outcomes, such as whether supervisors find problems or whether prosecutors secure convictions, rated from high to low. Reports also list priority actions. The process is called mutual because countries evaluate each other, and each takes its turn. After the report, the country enters follow-up, and weak results can lead to listing as a jurisdiction under increased monitoring. Banks read MERs when judging country risk, and governments use them to shape reform. Banks, investors and governments quote its ratings when they want an outside view of a country's system.

A fund administrator is updating its rating for a country where it has taken on a new client. It reads the country's latest mutual evaluation and notes low effectiveness scores on supervision and on beneficial ownership transparency. The team keeps the country at medium risk but adds extra checks on investors using offshore companies.