The Financial Action Task Force (FATF) held its first plenary of 2025 from February 19 to 21 in Paris, marking an important milestone under the Mexican Presidency of Elisa de Anda Madrazo. Delegates from over 200 jurisdictions and international organizations gathered to discuss and advance global measures against money laundering (ML), terrorist financing (TF), and proliferation financing (PF). Key areas of focus included financial inclusion, combating online child exploitation, updates to jurisdictions under increased monitoring, and strategic initiatives to enhance financial transparency.
Amendments to FATF Standards for Financial Inclusion
Recognizing that approximately 1.4 billion people globally lack access to financial services, FATF members agreed to amend Recommendation 1 of the FATF Standards. The update encourages the adoption of a risk-based approach (RBA) to Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regulations, allowing financial institutions to apply simplified due diligence for lower-risk customers. This initiative is expected to improve access to financial services while maintaining safeguards against illicit finance.
Key Amendments to Recommendations 1, 10, and 15:
1. Recommendation 1 – Emphasis on Proportionality:
- The revised Recommendation 1 underscores that countries should ensure AML/CFT measures are proportionate to the identified risks. This approach allows for the application of simplified measures in lower-risk situations, facilitating broader access to financial services without compromising security.
2. Recommendation 10 – Customer Due Diligence (CDD):
- Simplified CDD Measures: In lower-risk scenarios, financial institutions are now encouraged to adopt simplified CDD measures. Examples include verifying the identity of the customer and beneficial owner after establishing the business relationship or reducing the frequency of customer identification updates.
- Non-Face-to-Face Transactions: The amendments acknowledge that non-face-to-face transactions, when supported by reliable digital identification and appropriate risk mitigation measures, may not inherently pose higher risks. This change supports the use of digital verification methods, expanding financial access to underserved populations.
3. Recommendation 15 – New Technologies:
- Virtual Assets and Service Providers: Recognizing the evolving landscape of digital finance, the FATF now requires countries to consider virtual assets as "property," "proceeds," "funds," or other "corresponding value." Consequently, virtual asset service providers (VASPs) are subject to AML/CFT regulations, including licensing or registration and effective monitoring to ensure compliance.
- Risk Assessment Prior to Launch: Financial institutions must assess the money laundering and terrorist financing risks associated with new products, business practices, and technologies before their launch. This proactive measure ensures that potential risks are identified and mitigated early, fostering innovation while safeguarding the financial system.
These amendments are informed by extensive public consultation, reflecting inputs from over 140 stakeholders, including non-profit organizations, financial institutions, and academics. The FATF’s commitment to refining its Standards demonstrates a balanced approach to combating financial crimes while promoting financial inclusion.
Strengthening Efforts to Combat Online Child Sexual Exploitation
FATF finalized a comprehensive report on the financial aspects of online child sexual exploitation, focusing on illicit financial flows associated with live-streamed child abuse and sextortion. The report provides case studies and investigative methodologies to help financial institutions and law enforcement agencies detect and disrupt such crimes. A formal launch of the report is scheduled for March 13, 2025, in London, involving key stakeholders from the public and private sectors.
Updates on Jurisdictions Under Increased Monitoring
FATF made notable changes to its “grey list” of jurisdictions under increased monitoring:
New Additions:
Lao People's Democratic Republic and Nepal were added due to strategic deficiencies in their AML/CFT frameworks.
Removal:
The Philippines was removed from the list after demonstrating significant progress in strengthening its AML/CFT regime, including key legislative amendments and active participation in risk assessments.
These updates reflect FATF’s continuous monitoring of global compliance and commitment to ensuring effective AML/CFT measures across jurisdictions.
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Continued Suspension of the Russian Federation
The suspension of Russia’s FATF membership, initially enacted in February 2024, remains in place. FATF reaffirmed its stance, urging jurisdictions to remain vigilant against risks stemming from potential circumvention of financial restrictions linked to Russia.
Strategic Initiatives and Public Consultations
FATF launched several strategic projects and opened public consultations on key areas:
- Payment Transparency: A consultation on potential revisions to Recommendation 16 was initiated to enhance originator and beneficiary information in payment messages. The aim is to improve security, transparency, and efficiency in cross-border payments.
- Proliferation Financing & Sanctions Evasion: FATF is gathering input from stakeholders on best practices for identifying, assessing, and mitigating proliferation financing risks, aiding the private sector in compliance with counter-proliferation financing obligations.
Leadership Transition and Global Network Cooperation
The plenary announced the appointment of Giles Thomson (United Kingdom) as the next FATF Vice President, effective July 1, 2025. His expertise in financial sanctions and economic crime will support the FATF’s strategic direction.
In a move toward greater inclusivity, FATF invited Kenya to participate in plenary discussions, joining the Cayman Islands and Senegal as guest jurisdictions. This initiative aims to bring diverse perspectives from underrepresented regions into FATF’s decision-making processes.
Advancing Gender Diversity in AML/CFT Efforts
FATF reinforced its commitment to gender inclusivity through the Women in FATF and Global Network (WFGN) initiative. A second edition of the FATF Mentoring Programme will launch in March 2025, aimed at supporting female professionals in the field of AML/CFT.
Conclusion
The February 2025 plenary underscored FATF’s ongoing efforts to strengthen financial security, enhance regulatory frameworks, and promote financial inclusion worldwide. The decisions made during the session reflect a proactive approach to addressing emerging financial crime threats while fostering international cooperation. As FATF continues to evolve, its focus remains on ensuring a resilient and transparent global financial system.
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28 Mar 2025
