Money Laundering

Money Laundering: How effective is FATF in the Banking Sector within the UK?

The objective of this paper is to examine the effectiveness of the Financial Action Task Force (FATF) in the banking sector.   In order to examine the effect of FATF it is necessary to explore the measures taken by the U.K and the E.U and whether those measures were taken as a result of FATF.   The measures taken to tackle money laundering have ranged from international measures by the E.U to new and amended legislation by the U.K.   FATF’s influence has spread worldwide with its membership on the increase.   Its success is evident from not only the passing of new legislation by the E.U and U.K but by the new proposals placed by the E.U Commission for a third directive incorporating FATF’s 40 recommendations.

Money Laundering is generally concerned with the recycling of criminally derived funds through normal financial system operations with a view to making the funds available for future use while, at the same time, disguising their true source to protect them from seizure or forfeiture and criminal or civil prosecution.[1]

There are various separate criminal and regulatory requirements which banks are subjected to in connection with anti-money laundering and prevention of terrorism activities.   The aim is to attempt to prevent banks and banking markets from being used for criminal purposes.   It also attempts to use the information and systems and controls that banks operate to detect such activity to allow separate prosecution and enforcement.   The effect of laundering upon the banking system is frequently a particular concern.

International efforts to combat money laundering commenced with the United Nations Vienna Convention 1998 and the Council of Europe Strasbourg Convention 1990. The Vienna Convention introduced an obligation to criminalise the laundering of money derived from drugs trafficking and measures to improve international co-operation.   Stricter obligations were...