What is FATF-Style Regional Bodies (FSRBs) in Anti-Money Laundering?

Definition

FATF-Style Regional Bodies (FSRBs) are autonomous regional organizations modeled after the Financial Action Task Force (FATF). Their primary role is to promote and facilitate the implementation of the FATF’s 40 Recommendations on Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) within their respective regions. They assist member countries by evaluating, monitoring, and improving AML/CFT frameworks to combat money laundering, terrorist financing, and related financial crimes.​

Purpose and Regulatory Basis

FSRBs serve as vital regional entities that help implement global AML standards set by the FATF, a global intergovernmental body established by the G7 in 1989 to safeguard the international financial system. The FATF’s standards are embedded in various global and national regulations, including the USA PATRIOT Act and the European Union’s Anti-Money Laundering Directives (AMLD).

The purpose of FSRBs is to regionalize the FATF framework to address regional socio-economic and political contexts while ensuring alignment with international AML/CFT standards. They promote cooperation between members, facilitate mutual evaluations, disseminate typologies of money laundering and terrorist financing methods, and support capacity building through training and technical assistance. This networked approach enhances the global fight against money laundering by tailoring enforcement to regional risks and challenges while maintaining alignment with FATF global guidelines.​

When and How It Applies

FSRBs operate continuously across over 200 countries worldwide through their member states. Their evaluations and recommendations are triggered by the need to assess and strengthen the AML/CFT measures of member countries. Real-world use cases include:

• Periodic mutual evaluations of countries’ AML/CFT frameworks to ensure compliance with FATF standards.
• Addressing identified deficiencies through recommendations and follow-up support.
• Providing guidance to implement new regulatory requirements or emerging global recommendations (e.g., regulations on cryptocurrencies or digital assets).
• Offering technical aid and awareness programs to member governments and financial institutions.

For financial institutions operating within or across these regions, adherence to the standards promoted by FSRBs is crucial. Banks and other regulated entities must align their AML policies to comply with the FATF recommendations as adopted regionally by their FSRB to mitigate risks and avoid sanctions.​

Types or Variants of FSRBs

There are nine primary FSRBs globally, reflecting regional jurisdictions and tailored to specific geographic and economic realities:

• Asia/Pacific Group on Money Laundering (APG)
• Caribbean Financial Action Task Force (CFATF)
• Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)
• Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG)
• Financial Action Task Force on Money Laundering in South America (GAFISUD, now merged into GIABA)
• Inter-Governmental Action Group against Money Laundering in West Africa (GIABA)
• Middle East and North Africa Financial Action Task Force (MENAFATF)
• Group of Latin American and Caribbean Financial Action Task Forces (GAFILAT)
• Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL)

Each FSRB retains autonomy but adopts FATF standards, emphasizing regional priorities and risks. They perform similar functions but differ based on the specific AML/CFT challenges faced by their member countries.​

Procedures and Implementation

For member countries and financial institutions, compliance with FSRB standards involves several steps:

1. Risk Assessment: Countries assess and identify vulnerabilities to money laundering and terrorist financing within their jurisdictions and sectors.
2. Implementation of FATF Recommendations: Countries legislate and enforce AML/CFT measures aligned with FATF’s 40 Recommendations, including customer due diligence (CDD), suspicious transaction reporting, and record-keeping.
3. Mutual Evaluations: FSRBs periodically evaluate members’ AML/CFT systems through peer reviews to verify compliance and suggest improvements.
4. Capacity Building Programs: Training and technical assistance are provided to government agencies and private sector institutions to strengthen AML capabilities.
5. Monitoring and Reporting: Continuous monitoring of compliance through reports and feedback loops ensures ongoing adherence and adaptation to new threats.

Financial institutions must implement internal systems such as transaction monitoring, risk-based customer onboarding, and ongoing due diligence, abiding by the regulatory expectations shaped by the FSRB’s guidelines.​

Impact on Customers/Clients

From a customer’s perspective, the presence and enforcement of FSRB-guided AML frameworks mean:

• Enhanced scrutiny during customer onboarding with requirements for detailed identity verification (KYC).
• Increased transparency and regulatory oversight to detect and prevent illicit financial activity.
• Possible delays or restrictions in financial services if transaction patterns trigger AML concerns.
• Protection of their financial dealings and reputation due to strengthened AML surveillance by institutions.

Customers benefit from a safer financial system, but also face stricter compliance protocols which are necessary to mitigate risks of money laundering and terrorist financing.​

Duration, Review, and Resolution

FSRBs operate on an ongoing basis with a cyclical review process:

• Mutual evaluations typically occur every few years per member country to ensure continuous compliance.
• Follow-up reviews assess progress on addressing deficiencies.
• Member countries remain under periodic monitoring with updates to AML/CFT laws and practices reflecting emerging risks and global standards.
• Financial institutions must maintain continuous compliance and be prepared for audits or regulatory reviews aligned with FSRB cycles.​

Reporting and Compliance Duties

Institutions must carefully document AML efforts as per FATF and FSRB guidance:

• Maintain records of customer identity and transaction histories.
• Report suspicious activities to national Financial Intelligence Units (FIUs) following guidelines set by FSRBs.
• Cooperate fully with mutual evaluations and audits.
• Implement effective controls and staff training to uphold AML standards.
• Non-compliance can lead to sanctions, reputational damage, and legal penalties.

FSRBs provide frameworks for reporting and compliance, and member countries adopt these into enforceable laws and supervisory procedures.​

Related AML Terms

FSRBs intersect with various AML concepts including:

• FATF 40 Recommendations: The global standard that FSRBs help implement regionally.
• Customer Due Diligence (CDD) and Know Your Customer (KYC): Core procedures driven by FSRB standards.
• Financial Intelligence Units (FIUs): National bodies receiving reports generated under AML frameworks.
• Mutual Evaluations: The peer review mechanism used by FSRBs to assess member compliance.
• Typologies: FSRBs study money laundering and terrorism financing methods to update preventive measures.​

Challenges and Best Practices

FSRBs and member countries face challenges such as:

• Varied levels of capability and resources across regions.
• Balancing stringent AML controls with financial inclusion.
• Adapting quickly to emerging risks such as cryptocurrencies.
• Coordinating multi-national efforts and data sharing.

Best practices involve continual capacity building, regional cooperation, use of technology for monitoring, and harmonizing regulations to reduce gaps and overlaps.​

Recent Developments

Recent trends in FSRBs’ work include:

• Incorporation of digital currencies and crypto asset regulations into AML frameworks.
• Enhanced data analytics and typology research to detect sophisticated laundering schemes.
• Increased collaboration with international bodies such as the IMF and World Bank.
• Focus on the Crypto Travel Rule and digital asset-related compliance standards.

FSRBs remain dynamic to reflect global financial innovations and regulatory challenges.​

FATF-Style Regional Bodies (FSRBs) are essential regional AML/CFT organizations that extend the FATF’s global standards, ensuring tailored implementation, evaluation, and capacity building for member countries. They strengthen the global fight against money laundering and terrorist financing by regionalizing enforcement, supporting financial institutions, and promoting best practices adapted to local risks. Compliance officers and financial institutions must closely follow FSRB guidelines to maintain adherence to international AML regulations and safeguard their financial integrity.