WASHINGTON — On June 13, the Financial Action Task Force (FATF) concluded its joint plenary with the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), the FATF-style regional body for Europe, in Strasbourg, France. The plenary agreed to release reports on proliferation financing sanctions evasion typologies and how terrorist groups like Hamas, Hizballah, and the Houthis raise and move funds. The body also found consensus on a revised payments standard, new publications on how countries around the world are regulating virtual assets to combat illicit finance, and a new mechanism to prevent the FATF standards from being misused to pressure civil society groups.
“The FATF plays an important role in the global fight to counter terrorism and proliferation financing,” said Secretary of the Treasury Scott Bessent. “We are encouraged by the FATF’s adoption of reports that respond to private sector demand for more actionable information to combat financial crime as well as modernizing its standards for domestic and cross-border payments.”
Terrorist Financing Report
The FATF endorsed its first update for major global terrorist financing trends and risks in a decade. The report included input from over 80 countries and will help the public and private sectors better understand the nature of global risks, trends, and methodologies related to the
financing of terrorism, including both United Nations (UN)-designated groups and non-UN designated groups. It will aid governments and financial institutions in identifying and cutting off from the international financial system groups such as Hamas, Hizballah, and the Houthis.
Proliferation Financing Report
The task force also endorsed a new report on proliferation financing and sanctions evasion. Following the dissolution of the UN 1718 Panel of Experts last year, the FATF began work on a project that culminated with 40 case studies and typologies about how illicit actors associated with Iran, North Korea, and Russia evade sanctions. The report highlights how North Korea raises revenue for its weapons of mass destruction program. The report, to be issued soon, will inform how the public and private sectors assess and mitigate relevant proliferation financing risks in the coming years.
Recommendation 16
The FATF updated its standard for domestic and cross-border payments. The revision modernizes the standard by recognizing the role of non-bank financial institutions in payments and seeks to promote transparency and efficiency in cross-border payments. The revisions will assist financial institutions in combating fraud and sanctions evasion and respond to the G20 call for faster, more transparent, and efficient payments. The FATF will work on guidance for governments and the financial sector to implement the standard, which will go into effect no later than 2030, and establish a working group with the private sector to solicit feedback on the guidance and implementation.
Virtual Asset Reports
FATF members agreed to publish two reports on virtual assets. One highlights progress in implementation of the FATF standards for virtual assets, in particular for countries with substantial virtual asset activities, and the other outlines good practices for supervising Recommendation 16 for virtual assets. The reports indicate progress across the global network in spurring innovation and in regulating virtual assets to manage illicit finance risks, while noting only modest progress on supervision and enforcement actions related to misuse of virtual assets by criminal actors. The FATF will continue to promote implementation of the FATF standards for virtual assets by all countries, discuss emerging threats in the virtual asset ecosystem, and develop resources through targeted projects to support effective implementation.
Addressing the Unintended Consequences of the FATF Standards
The FATF approved procedural changes to address the misapplication of the FATF standards that stifle the legitimate activities of non-profits. With the amended procedures, the FATF will now be able to better assess and address cases of countries disrupting non-profit and humanitarian activities under the guise of anti-money laundering/countering terrorist financing controls. Treasury was closely involved in the development and approval of this project, which has been a top priority for the current Mexican presidency of the FATF.