Giulia Dondoli
Member with Delegated Authority AML Systems
In a recent review, the Financial Action Task Force (FATF) found the application of recommended controls for gatekeepers still lacking.
FATF is an international organisation that sets global standards for anti-money laundering and counter terrorism financing (AML/CFT). It monitors countries' compliance and helps coordinate efforts to address such issues. FATF is highly influential in setting global standards for AML/CFT regulations. Over 205 jurisdictions worldwide form the FATF Global Network, adhere to the FATF standards and agree to implement measures to prevent and combat money laundering from various crimes, including corruption-related offences such as bribery, extortion, and theft.
According to FATF (page 5):
“Corruption and money laundering are inextricably linked. Corrupt actors must launder bribes and misappropriated funds to enjoy their criminal profits. Through their role as gatekeepers to the financial system, non-financial professionals can facilitate, unwittingly or wittingly, high-level corruption. “
“To minimise such risks, the FATF took action over 20 years ago by requiring countries around the globe to apply AML/CFT measures to gatekeepers - lawyers, accountants, trust and company service providers, and real estate agents. These measures aim to address the vulnerability of the sectors to money laundering and corruption threats, by equipping professionals with the necessary know-how to detect indications of possible crimes. When these professionals are not regulated in accordance with the FATF Standards, they remain exposed to significant criminal risks and lack those measures that would allow them to see the red flags of money laundering."
Over 205 jurisdictions worldwide form the FATF Global Network, adhere to the FATF standards and agree to implement measures to prevent and combat money laundering from various crimes, including corruption-related offences such as bribery, extortion, and theft.
FATF has undertaken a Horizontal Review of Gatekeepers’ Technical Compliance Related to Corruption (the Horizontal Review). The Horizontal Review is an examination of the actions taken by FATF members to apply important aspects of the FATF Recommendations to gatekeepers.
Gatekeepers, Money Laundering and Corruption
Gatekeepers possess specialised knowledge that can facilitate the movement of money and conceal involvement in illicit schemes. While the majority of gatekeepers operate within the law and ethical norms, there are professional enablers who assist corrupt officials. These enablers help corrupt officials commit and conceal acts of corruption, allowing them to enjoy the proceeds of their illicit activities.
For corrupt actors, utilising these gatekeepers provides an advantage over carrying out these tasks directly. For instance, relying on a company service provider to create a corporate entity or act as a nominee, or engaging a lawyer to represent that company and open a bank account, may lend credibility to the corrupt actors seeking to access the financial system and move money more seamlessly between jurisdictions. These gatekeepers may also aid corrupt actors in obtaining services with less friction, as subsequent providers may erroneously assume that the person has been vetted.
To minimise corruption and money laundering risks, the FATF Standards require countries to apply to gatekeepers AML/CFT measures – such as customer due diligence, transaction monitoring and suspicious activity reporting obligations – similar to what banks and other financial institutions are required to do. Each gap and weakness in a country’s AML/CFT system represents an opportunity for the corrupt to further their harmful activities.
The FATF Review
On the surface, the Horizontal Review shows positive results – over half of FATF members have scored over 80% adherence to the FATF Recommendations for gatekeepers, with Luxemburg and Portugal scoring 100%. However, with the average being 74%, 12 countries are found to fall below the average (including New Zealand, with 73%). Moreover, seven FATF members are found to fall below the score of 50%. These jurisdictions are Mexico (48%), Brazil (42%), Israel (27%), the Republic of Korea (5%) and the United States, China and Australia (0%). These countries represent more than half of the world’s GDP. Australia is currently reviewing its AML/CFT requirements for lawyers, accountants, trust and company service providers, and real estate agents. We are expecting these sectors to be covered by AML/CFT legislation in 2025.
The Horizontal Review comments that when gatekeepers are not sufficiently regulated or supervised, the repercussions extend beyond the immediate risk of facilitating illicit activities. The first significant downstream effect is the diminished effectiveness of criminal prosecutions. This is because insufficient regulation and supervision make it more challenging to prove the intent and knowledge required for money laundering offences.
Second, inadequate regulation can hinder international cooperation, a critical component in combating grand corruption and money laundering. Cross-border investigations often rely on the timely and accurate exchange of financial intelligence and information about suspects. If gatekeepers are not required to maintain detailed records or report suspicious activities, essential data may not be available when needed. This absence of information can obstruct efforts to trace illicit funds, identify involved parties, and uncover the full scope of transactional criminal networks.
Call for Action
The FATF has highlighted gatekeeper money laundering risks for decades. FATF members have been required to impose preventive measures on gatekeepers and supervise them since 2003. Some regimes remain insufficient 20 years after international standards have been in place and expose themselves to money laundering and corruption. When gatekeepers are not sufficiently regulated or supervised, this can have a downstream effect on the effectiveness of criminal prosecutions, and international cooperation. Money laundering is an international affair, and, as a global community of countries, we are as strong as our weakest link.
The Horizontal Review concludes that FATF members still lagging must urgently ensure that gatekeepers are adequately covered in line with the FATF’s long standing Recommendations in this area.
Dr Giulia Dondoli is a certified anti-money laundering specialist and founder of Total AML. Giulia helps reporting entities in New Zealand and Australia comply with their AML/CFT obligations.
