FATF Issues New Guidance on Mitigating Proliferation Financing Risk

  • Richard Marley
  • June 30, 2021
  • 3 minutes read
  • 80

The new guidance puts a spotlight on the need for effective onboarding processes, ongoing monitoring, employee training, risk management, sanction screening, and a robust compliance structure. 

The global regulatory authority, Financial Action Task Force (FATF), has published new guidance for the mitigation of proliferation financing risks. The guidance has been published to enable the private and public sectors to effectively implement the new requirements for the identification and assessment of the risk. 

The FATF’s Recommendation 1 and its Interpretive Note was revised in October 2020 for the introduction of new requirements, particularly for North Korea and Iran. In March, a consultation on the draft version was issued

The guidance was finalized at the fourth FATF Plenary under the German Presidency of Dr Marcus Pleyer between 21-25 June. 

Instructions included in the guidance are related to how countries, financial institutions, Designated Non-Financial Businesses and Professions (DNFBP) and VASPs (Virtual Asset Service Providers) can take proper risk assessment measures for their proliferation risk, and how they can mitigate this once identified. 

An updated list of indicators is included in the guidance for detection of the potential breach, non-implementation, or evasion of proliferation financing targeted financial sanctions. 

Here’s a list of the measures that have been highlighted in the FATF’s guidance:

  • Need for robust customer onboarding measures 
  • Ongoing monitoring of customers
  • Employee training
  • Effective risk assessment 
  • Proper sanction screening systems 
  • Regular and flexible screening procedures
  • Strong compliance structure

The guidance also lays down a warning against combined efforts of businesses and individuals to outwit targeted financial sanctions through the use of shell companies, dummy accounts, fraudulent intermediaries, and middlemen. Advice has been provided for supervisors and self-regulatory bodies to ensure proliferation risks are being properly identified and assessed. 

The guidance is available here.

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