The 41st FATF Recommendation: Why Preventive Measures Targeting Trade-Based Money Laundering Should Reach Beyond Banks


It is an open secret that the Financial Action Task Force (FATF), is considering a new recommendation on trade-based money

laundering. Its intentions were telegraphed by the publication in June 2006 of its monograph entitled “Trade Based Money Laundering” (the “FATF Report”). Whether the FATF will add a 41st Recommendation to its current 40, or, more likely, a tenth recommendation to the nine Special Recommendations on

Terrorist Financing, has yet to be announced. In my

view, adding a new recommendation is not only a

good idea, but also FATF should go further than it has

in the past. In order to be effective, any new

recommendation on trade-based money laundering

should encompass not only financial institutions and

designated non-financial businesses and professions

(DNFBPs) but also companies involved in the

export or import of goods, including firms

transporting or arranging for the transport of those

goods, such as freight forwarders, shippers and air

couriers. And since most of the largest global industrial

companies are also exporters and importers, any such

proposal would encompass a whole new category of

non-financial companies that may not be paying close

attention to the FATF 40+9 currently.

If adopted, this would require governments to take

a number of actions, to ensure, among other things,

that exporters and importers conduct customer due

diligence, keep records and file suspicious activity

reports (SARs), just as financial institutions and

DNFBPs must do. And in the US, this would

also include the four pillars of an AML program

under section 352 of the USA PATRIOT Act:

internal policies, procedures and controls; the

designation of an anti-money laundering (AML)

compliance officer, an ongoing employee training

program, and an independent audit function to test

the AML program.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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