Guidance for financial institutions in detecting terrorist financing

Guidance for financial institutions in detecting terrorist financing

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At its extraordinary Plenary meeting on 29-30 October 2001, the Financial Action Task Force on Money Laundering (FATF) agreed to develop special guidance for financial institutions to help them detect the techniques and mechanisms used in the financing of terrorism. The FATF subsequently brought together experts from its member countries to gather information on and study the issue of terrorist financing as part of its annual exercise on money laundering methods and trends. One goal of this exercise was to begin establishing such guidance for financial institutions that could be issued along with the annual FATF Report on Money Laundering Methods and Trends. Material derived from the exercise, along with contributions from the Egmont Group and other international bodies, was used in developing the present document. The information contained in it represents a first attempt to provide necessary guidance for financial institutions in this area.

The goal in providing this guidance is to ensure that financial institutions do not unwittingly hide or move terrorist funds. Financial institutions will thus be better able to protect themselves from being used as a conduit for such activity. To help build awareness of how terrorists, their associates or those who support terrorism may use the financial system, this document describes the general
characteristics of terrorist financing. The accompanying case studies illustrate the manner in which competent law enforcement authorities or financial intelligence units (FIUs) are able to establish a terrorist financing link based on information reported by financial institutions. Annex 1 contains a series of characteristics of financial transactions that have been linked to terrorist activity in the past. 

When one or several of these potentially suspicious or unusual factors is present in regard to a specific financial transaction – especially when the individual or entity may appear on one of the lists of suspected terrorists, terrorist organisations or associated individuals and entities (see Annex 2: Sources of Information) – then a financial institution would have cause to increase its scrutiny of the transaction and any associated individuals or entities. In certain instances, this scrutiny could result in reporting the transaction to authorities under applicable suspicious or unusual transaction reporting systems.

Please note that this document refers to the FATF Recommendations as published in October 2004, and does not yet take into account the 2012 revision of the FATF Recommendations. 

Click here for the 2012 FATF Recommendations, including the conversion table from the old Recommendation to the new FATF Recommendation

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