Best Practices: Managing the Anti-Money Laundering and Counter-Terrorist Financing Policy Implications of Voluntary Tax Compliance Programmes
Voluntary tax compliance programmes (VTCs), aimed at raising tax revenue; increasing tax honesty and compliance; and/or facilitating asset repatriation, could potentially have a negative impact on the effectiveness of AML/CFT, if they exempt AML/CFT measures from being applied. For example, some programmes exempt financial institutions from the requirements to conduct full customer due diligence on taxpayers and to verify that the assets come from a legitimate source.
The FATF has agreed four basic principles which underscore the importance of ensuring that jurisdictions address and mitigate the ML/FT risks of VTC programmes, and are able to effectively investigate and prosecute their abuse.
This paper sets out international best practices, based on these four principles, which will assist jurisdictions in the implementation of VTC programmes that do not impede the effective implementation of AML/CFT measures.
This paper was originally published in October 2010 and has been updated in October 2012 in order to clarify the application of the four basic principles on voluntary tax compliance since tax crimes became a predicate office to money laundering, with the adoption of the 2012 FATF Recommendations.