FATF Lawyers

What is FATF?

The Financial Action Task Force (FATF), established in 1989 as an international standard-setting and inter-governmental body, has implemented a range of measures encompassing legal, regulatory, and operational aspects to govern the prevention of money laundering and terrorism financing. Recognizing the significant threats posed by these crimes and the susceptibility of certain professions and businesses to their influence, FATF expanded its scope in 2003 to include them within the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework. Consequently, these professions and businesses assumed the role of gatekeepers and are now referred to as Designated Non-Financial Businesses and Professions (DNFBPs). This expansion brought forth several mandatory obligations for these gatekeepers, including requirements related to customer due diligence, record-keeping, reporting, compliance functions, and employee training programs.

Against this backdrop, the objective of this paper is to assess the impact of FATF’s influence on the AML/CFT framework in Malaysia, which, in turn, is shaping the compliance standards of the legal profession. Legal practitioners are now tasked with the responsibility of scrutinizing their clients for any signs of money laundering or terrorist financing activities. The authors argue that the gatekeeper role assumed by legal practitioners inevitably raises contentious issues concerning ethical conduct, the preservation of professional legal privilege, and the independence of the legal profession.

Who are FATF Lawyers?

FATF lawyers are legal professionals who specialize in advising clients on how to comply with the regulations and requirements set forth by the Financial Action Task Force (FATF). The FATF is an intergovernmental body with a critical mission: to prevent the abuse of the global financial system for money laundering and terrorist financing activities. FATF lawyers play a crucial role in supporting clients navigate the complex landscape of anti-money laundering (AML) and counter-terrorist financing (CFT) regulations, helping them identify and manage potential risks, and ensuring compliance with FATF standards.

Responsibilities of FATF Lawyers: FATF lawyers are primarily responsible for:

  1. Providing legal advice on AML/CFT issues: FATF lawyers offer guidance on the interpretation and application of FATF’s recommendations, including the introduction of new regulatory requirements and the ongoing monitoring of existing measures.
  2. Conducting risk assessments: FATF lawyers help clients identify potential risks associated with money laundering and terrorist financing, assessing the level of risk and developing strategies to mitigate those risks.
  3. Developing compliance programs: FATF lawyers design and implement tailored compliance programs for clients, ensuring that they meet the necessary regulatory requirements and best practices.
  4. Monitoring and reporting suspicious transactions: FATF lawyers assist clients in identifying and reporting suspicious transactions, ensuring that they comply with FATF’s guidelines on the prevention and detection of money laundering and terrorist financing activities.
  5. Staying up-to-date with regulatory changes: FATF lawyers remain informed about the latest regulatory developments and updates in AML/CFT, helping clients adapt their compliance strategies accordingly.

FATF Recommendations on Lawyers

More than a decade ago, the Financial Action Task Force (FATF), along with its 39 member nations, recognized that several “Designated Non-Financial Businesses and Professions” (DNFBPs) played a crucial role as “gatekeepers” in both domestic and international financial systems. These gatekeepers, including lawyers, accountants, and trust and company service providers, could unintentionally become involved in money laundering and terrorist financing activities. Among these gatekeepers, lawyers engaged in various activities, such as trust and estate work, business transactions, real estate dealings, and other similar legal services, found themselves at the center of this “gatekeeper” initiative.

Over the past ten years, FATF has collaborated with representatives of the legal profession to create, develop, and implement guidelines similar to those applied to financial institutions. Recommendations 22 and 23 specifically call upon FATF member nations to enact laws, rules, and regulations that impose Customer Due Diligence (CDD), Suspicious Transaction Reports (STR), and No Tipping-Off (NTO) obligations on lawyers who provide services like those commonly offered by trust and estate lawyers.

Representatives of the legal profession, including notaries from various civil law jurisdictions, worked together with FATF to establish a “Risk-Based Approach” (RBA) addressing these concerns. Known as the “RBA for Legal Professionals,” this guidance, adopted by FATF in 2008 and updated in 2019, aims to maintain the traditional attorney-client relationship while acknowledging lawyers’ vital role as gatekeepers and their potential inadvertent involvement in money laundering or terrorist financing. It’s important to note that this guidance encourages legal professionals to submit STRs without notifying a client or potential client of the report (No Tipping-Off or NTO). Many European jurisdictions have embraced this guidance, with the UK, for instance, requiring solicitors to file STRs on clients under specific circumstances in accordance with the Proceeds of Organized Crimes Act. Similar obligations apply to lawyers in numerous FATF member nations.

Mandate of the FATF

Money laundering, terrorist financing, and the funding of weapons of mass destruction remain ongoing concerns that pose risks to the stability of the financial system. Addressing these threats demands an unwavering political commitment.

In recognition of this, in 2019, FATF Ministers extended the organization’s mandate indefinitely, marking a departure from its previous time-bound mandate, which had spanned three decades.

This expanded mandate underscores the imperative for FATF to continue taking a leading role in coordinating and executing effective global efforts to combat the exploitation of the financial system by criminals and terrorists. It also enhances FATF’s capability to respond to these pervasive threats that confront all nations.

Iryna Berenstein
Associated Partner
Mrs. Berenstein is a distinguished and outstanding lawyer with profound experience and exceptional legal knowledge in the field of International Private Law, Financial Law, Corporate Law, investment regulation, Compliance, Data Protection, and Reputation Management.

FATF Lawyers FAQ

What is the FATF in international law?
The FATF Recommendations form the basis for all countries to combat money laundering, terrorist financing, and proliferation financing. Countries are urged to implement these measures effectively in their national systems.
Which country is under FATF blacklist?
Currently, in December 2023, the FATF blacklist includes only North Korea, Iran, and Myanmar, which are countries under a Call for Action.
Is FATF legally binding?
While not binding, many countries worldwide have politically committed to combat money laundering by implementing the 40 Recommendations.
Who owns FATF?
The Financial Action Task Force (FATF), also known as Groupe d'action financière (GAFI) in French, is an intergovernmental organization established in 1989 by the G7 to develop policies to combat money laundering and protect certain interests.
Is the USA part of FATF?
TFFC, representing Treasury, leads the U.S. delegation to the FATF, consisting of members from the Departments of State and Justice, as well as federal financial regulators.