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CFT Compliance

CFT compliance is necessary to ensure better understanding of terrorist financing risks so that illicit organizations receiving dirty funds could be stopped.

CFT

Financing terrorists and their nefarious organizations is a challenge for law enforcement around the world. Not preventing such acts can have serious consequences for businesses and the legal financial system. Usually, the funds used to finance these organizations come from illicit money laundering committed through financial institutions like banks, crypto exchanges, and insurance firms, etc. Therefore, businesses associating ties with clients need to perform identity verification and a series of background checks to make sure no bad actor can access their services. This is essential in combating financial crime and illicit activities related to it.

What is CFT Compliance?

CFT also known as Countering the Financing of Terrorism (CFT) is a mandatory requirement for corporate and financial organizations. Following CFT compliance means investigating and analysing all the sources that could possibly be used in funding individuals and groups to acquire various ideological, political or terrorist goals. 

This is possible by ongoing monitoring of customer accounts, their transactions and taking into account the overall risk they pose. By tracking down suspicious activities, illicit money trails can be found effectively to prevent terrorist organizations from getting the better of the legal financial system.

CFT compliance makes sure financial institutions practice Anti Money Laundering (AML) obligations so that no bad actors can breach the system and gain illegal financial profit, thereby, preventing them to make ill-obtained money for funding. 

Why is CFT Compliance Important?

Terrorist organizations require money and to carry out their illegal operations such as buying and trading weapons of mass destruction, covering up travel charges for equipment, and properly executing their attacks, etc. One of the most effective ways to counter-terrorism financing and to disrupt material support for future attacks is by collecting information from withdrawals,  purchases, and other financial transactions through transaction monitoring.

Apart from that, countering the financing of terrorism is a part of the global effort to combat terror threat and money laundering. Since terrorists and the groups they run, raise money through various sources, countries and financial businesses need to develop proper action plans and policies to cater to all the relevant aspects involved.  

FATF on CFT 

Understanding the Risks

The Financial Action Task Force requires organizations to develop and understand all possible risks of terrorist financing keeping in view the ever-changing jurisdictions of the financial landscape. This understanding plays an essential role in allocating resources in order to disrupt terrorist activities. 

Highlighting Terrorist Links

CFT compliance requires countries to implement FATF guidelines in developing their regulatory framework to prevent terrorist financing activities from occurring. Some updates to these recommendations include an ‘explicit inclusion’ to stress the importance of financing used in planning, preparation, and participation in terrorist acts. These also highlight the receiving and delivering terrorist training in any form. 

Effective Implementation 

FATF requires that participating countries take adequate measure in the effective and appropriate implementation of FATF standards to identify and take down terrorist heads and their organizations. In this regard, both confidential and public guidance is necessary to address both the private and public sectors in recognizing the importance of CFT compliance. 

Global Efforts

According to FATF, countries need to work on strategic deficiencies in systems to combat terrorist financing better. Financial organizations working in these countries need to adopt robust measures so that terrorist financiers are not able to circumvent the AML/CFT controls. Countries with a weak infrastructure need to work towards making jurisdictions better so that the legal financial entities could practice better Anti Money Laundering standards.  

Transparent Coordination

Domestic, international and other financial intelligence units should continue to collaborate with each other to make CFT compliance possible. To make this happen FATF also appointed regional bodies that collect essential information regarding particular jurisdictions. 

Suggested Reads:

CFT & AML Compliance To Hold Back Financial Crimes

The Expected No-Deal Brexit and AML/CFT Laws in the UK

Monitor your customers’ AML risk profile in real-time and stay ahead of the regulatory compliance requirements