How does the Financial Action Task Force (FATF) measure the effectiveness of a country's efforts to combat money laundering and terrorist financing?

The Financial Action Task Force (FATF) assesses countries' AML/CFT regimes through a peer-review process known as a "mutual evaluation." This core activity involves a team of experts from other FATF member countries and FSRBs examining a country's legal framework (technical compliance) and the practical implementation of that framework (effectiveness). The resulting Mutual Evaluation Report (MER) provides a comprehensive analysis of the country's system, identifies deficiencies, and makes recommendations for strengthening its measures. This process is the primary mechanism for monitoring global compliance with the FATF Standards.

B. The FATF Evaluation Committee is a body that oversees the mutual evaluation process; it is not the measurement method itself.
C. The Basel Committee on Banking Supervision sets international standards for banking regulation, not the FATF's methodology for AML/CFT assessment.
D. Internal audits are a country's own domestic process; the FATF's measurement is an external, peer-led evaluation.

1. Financial Action Task Force (FATF). (2022). Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems. FATF, Paris, France. (See Introduction, paragraphs 3-5, which describe the mutual evaluation process as the basis for assessment).

2. Financial Action Task Force (FATF). (2023). FATF Procedures for the FATF Fourth Round of AML/CFT Mutual Evaluations. FATF, Paris, France. (See Section I: The Mutual Evaluation Process, which details the entire peer-review mechanism).