What is the role of the Financial Action Task Force (FATF) in combating money laundering?

The Financial Action Task Force (FATF) plays a crucial role in the global fight against money laundering by setting international standards and promoting effective measures among countries. This organization develops and monitors adherence to its recommendations, which provide a comprehensive framework for combating money laundering and terrorist financing. By establishing these standards, the FATF encourages nations to implement legislation and regulations that strengthen their financial systems, thereby enhancing cooperation and coordination in international efforts to counter these crimes.

This focus on creating standards and promoting best practices is essential because money laundering is a transnational issue that requires a unified global response. The FATF doesn't manage financial institutions directly, conduct audits, or impose sanctions; rather, it acts as a leader in fostering a collaborative approach to prevent and combat money laundering through policy guidance and mutual evaluation of member countries' compliance with its prescribed standards.