The dark side of anti-money laundering: Mitigating the unintended consequences of FATF standards

Abstract

The Financial Action Task Force (FATF) is the primary authority for setting standards in the fields of anti-money laundering and countering the financing of terrorism. However, there are legitimate concerns regarding the unintended adverse effects resulting from the expansion of FATF standards. This paper aims to examine the dark side of FATF standards, focusing on the issues of de-risking, financial exclusion, and the unwarranted targeting of Non-Profit Organizations. While the FATF standards themselves are not the sole causes of these phenomena, they can contribute to their persistence and exacerbation. Addressing these effects necessitates a thorough understanding of FATF's risk-based approach, adherence to the principle of proportionality, and a sense of ownership in the design and implementation of FATF standards.