Major Global AML
Regulations

The Financial Action Task Force (FATF) was created in 1989 as the G7's initiative to fight against money laundering and terrorism financing. FATF is an international policy-making body operating in 39 implementing jurisdictions and two regional organizations (the Gulf Cooperation Council and the European Commission). The FATF Recommendations, first published in 1990, have been revised five times since then, covering multiple topics such as security standards to prevent money laundering or terrorist financing threats. Moreover, this AML body seeks to produce the necessary 'political will' to bring about varied legal or operational measures across countries and encourages them to adopt national regulatory reforms to fight unlawful activities.

Even though it is not binding, member nations must generally comply with the rules set forth by the FATF for an effective approach against money laundering on a global scale. Importantly, all FATF member countries must implement and enforce stringent transaction monitoring protocols with their respective Financial Intelligence Units (FIUs). Institutions obligated to follow AML/CFT regulations must then carefully monitor their customers' transactions in real time and anonymously report any scams or suspicious activities through Suspicious Activity Reports (SARs) and Suspicious Transaction Reports (STRs).

The global need for Anti-Money Laundering (AML) regulations has seen growing attention recently due to the inception of virtual assets, such as cryptocurrencies. To tackle these new money laundering threats, the Financial Action Task Force (FATF) has set forth the Crypto Travel Rule, which monitors the origin and movements of virtual currencies/tokens.

The Financial Action Task Force (FATF) Crypto Travel Rule requires Virtual Asset Service Providers (VASP) to collect and share information on the originator and beneficiary of a transaction with other VASPs. This includes identity documents, customer ID, full name, address, and physical address. In addition, the 16th Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Recommendation also makes it mandatory for institutions to register users' accounts with complete identity verification data.

FSRBs, or FATF Style Regional Bodies, are regional organizations that adhere to the Financial Action Task Force (FATF) recommendations. These organizations are dedicated to increasing awareness and providing technical support regarding implementing FATF's 40+9 standards. They also offer regional insights on socio-economic issues following their respective guidelines. FSRBs play a significant role in assisting FATF with guideline amendments based on their inputs.

The Financial Action Task Force (FATF) Style Regional Bodies (FSRBs) are responsible for completing various tasks. These include assessing how countries implement the 40 FATF Recommendations, examining typologies and region-specific money laundering and terrorist activities, disseminating Anti-Money Laundering/Combating the Financing of Terrorism (AML-CFT) best practices to legal, governmental, regulatory, and public enterprises, offering technical assistance to member countries, and helping regional countries adapt their financial systems to incorporate digital assets like cryptocurrencies.

FATF Style Regional Bodies (FSRBs) refer to intergovernmental organizations that unite countries and jurisdictions within a specific region to combat money laundering and terrorist financing. The FSRB Members are the Asia/Pacific Group on Money Laundering (APG), the Caribbean Financial Action Task Force (CFATF), the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), Financial Action Task Force of Latin America (GAFILAT), Intergovernmental Action Group against Money-Laundering in West Africa (GIABA), The Middle East and North Africa Financial Action Task Force (MENAFATF), Eurasian Group (EAG), Eastern and Southern African Anti-Money Laundering Group (ESAAMLG) and the Task Force on Money Laundering in Central Africa (GABAC).

The European Union (EU) has enacted a series of Anti-Money Laundering Directives (AMLDs) to help combat Money Laundering and Terrorist Financing. The 4th, 5th and 6th EU AMLDs established increasingly stringent regulations on the regional typologies associated with Money Laundering and Terrorist Financing. Each Directive is responsible for implementing these measures in member states, which are expected to comply with set deadlines. Through their implementation, the EU hopes to effectively control region-specific threats by setting up advanced prevention measures.

The EU Parliament has issued six Anti-Money Laundering Directives (AMLDs) to meet global standards for countering money laundering and terrorist financing. From the 1st AMLD, which focused on banks and basic money laundering crimes, to the 6th AMLD, which presents milestone measures in protecting whistle-blowers from bribery, corruption, and related malpractices, each Directive has increased in response to the rising complexity of crime typologies. The financial sector is particularly impacted as it must follow enhanced due diligence measures against terrorist financing, suspicious transactions, and risk-based diligence. Additionally, areas such as the gambling sector and crypto exchanges have been brought into regulation, with an emphasis placed on beneficial ownership data retrieval. All these measures are implemented to protect citizens from daily illegal activities that are becoming more sophisticated.

The Wolfsberg Principles – initially introduced in October 2000 as Global Anti-Money Laundering Guidelines for Private Banking – have had a major influence on AML compliance. Prominent private banking institutions, including Bank of America, J.P. Morgan Chase, and HSBC, formed the initiative's foundation, drafting Customer Due Diligence (CDD) guidelines to counter money laundering-terrorist financing threats. As a result, the Wolfsberg Principles are widely respected within the domain and are often cited alongside established commandants such as FATF, Basel Committee, and Transparency International CDD standards.

While adopting The Wolfsberg Principles is voluntary for private banking organizations, its risk measurement, screening, and monitoring strategies are highly recommended. In addition to the founding banks, the Wolfsberg group frequently hosts policy briefings with international financial bodies such as The New York Clearing House, European Banking Federation, and International Banking Federation - all working towards mitigating criminal activity within the sector.

The governing structure inside the Egmont Group consists of four intra-groups: The Heads of FIUs (HoFIUs), the Egmont Committee, the Regional Groups, and the Working Groups. These internal groups have separate duties that include activities such as Legal Working Group (LWG), Training and Communication, Outreach, Operational Working Group (OpWG), and IT Working Group (ITWG).

The most prominent services provided by Egmont are Anti Money Laundering-Counter Financing Terrorism measures through Suspicious Transaction Reports (STRs) and Trade-Based Money Laundering (TBML). Indicators related to STRs involve large cash transactions, undefined political/influential fund transfers, or shell company activities. In contrast, suspicious TBML indicators may be found in shell companies with no online presence or trafficking, counterfeiting, or smuggling activities, as well as forged or unreliable trade documents or baseless offshore bank transfers.

The Basel Committee on Banking Supervision (BCBS) was created in 1974 by the G10 central banks to guide worldwide financial stability. It is a voluntary institution. However, member nations must abide by the regulations to promote quality banking supervision and international financial market reform. In the late 90s, when globalization of the financial system occurred and national banks experienced capacity and information issues, the BCBS gained increased attention. The head office of BCBS is situated in Basel, Switzerland, at the Bank for International Settlements (BIS), though they are two distinct entities.

BCBS emphasizes compliance with Know Your Customer (KYC) and Customer Due Diligence (CDD) standards for correspondent banking relationships through its research publications like The Core Principles for Effective Banking Supervision and The Supervision of Cross Border Banking being implemented correctly by banks and non-banking financial institutions. Moreover, BCBS also provides instructions for managing politically exposed persons (PEPs), numbered accounts, high-risk customers, and pooled accounts through their KYC policies which emphasize aspects such as customer identification & screening against sanctions at the account opening stage, risk assessment on customers & transactions conducted through their accounts, record keeping & timely audits on customers' activities, etc., thus enabling detection & prevention of money laundering.

Economic sanctions are measures imposed on individuals, countries, or organizations by the United Nations (UN) and other international or regional organizations, such as the Office of Foreign Asset Control (OFAC), the U.K. Treasury Office, or the European Union (EU). Economic sanctions are mainly implemented for political reasons, such as trade embargos, travel bans, and restrictions on commercial activity.

Notable United States sanctions include those targeting Cuba for its dictatorship and Russia for its military aggression against Ukraine. Sanctioned countries can also include North Korea for sponsoring war and nuclear weapons proliferation, Syria for endorsing terrorism, Afghanistan and others for illegal trade, Iraq for terrorism financing, and Ethiopia, Libya, and South Africa for human rights abuses.

The UN has also issued economic sanctions against specific countries, including Somalia, due to political unrest, North Korea to stop nuclear weapons development, and Libya in response to human rights violations. Once a sanctioned entity works towards common goals and values, its sanctions may be lifted. History has shown that these measures can effectively discourage certain activities or behaviors within an individual country or worldwide.