FATF Scrutinized Over Allegations of Facilitating Political Abuse

The Financial Action Task Force (FATF) has recently come under fire for claims that its anti-money laundering (AML) recommendations are being exploited by authoritarian political leaders and governments. The Economist reported this month that FATF's guidelines “can be used to make politically motivated arrests.” The newspaper highlighted that the integration of financial crime offenses into national penal codes, combined with provisions for lengthy pre-trial detentions and broad definitions of "terrorism," allows repressive regimes to detain individuals for extended periods on baseless charges. Between 2016 and 2019, for example, only 2% of those investigated under India’s Unlawful Activities Prevention Act were convicted of a crime.

While FATF's recommendations are technically non-binding, the practical implications of being 'grey-listed' or 'black-listed' are severe, often leading to significantly reduced international investment. The Economist also noted that FATF rules can be overly broad, giving governments the flexibility to interpret them in ways that target political opponents. "Even democracies are sometimes tempted. In 2022 Canada broadened its anti-money-laundering laws to stop funding for a protest by lorry drivers that had paralysed Ottawa,” the publication stated.

The proposed solution involves reforming FATF, including the introduction of more precise standards, a channel for reporting abuse, and mechanisms to prevent countries from misusing the system. FATF responded to the criticisms, stating it has “proactively addressed the misuse of the FATF Standards for other purposes that curtail human rights.” The organization added, “As a result of this work we have updated the standards and guidance and improved training, including of assessors.”

Based in Paris, FATF clarified that while its standards require cooperation to combat money laundering, they “do not require this in contravention of fundamental principles of domestic law, which in line with jurisdiction human rights, do not require cooperation in politically motivated investigations.” Additionally, a declaration by FATF Ministers in April emphasized support for efforts to prevent the misuse of FATF requirements to restrict the activities of non-profit organizations. “Going forward, the FATF will revise its standards on risk identification and mitigation to focus on the need for countries to apply a risk-based approach which will facilitate actions in favour of financial inclusion,” the declaration stated.

The Economist's criticism is not isolated. Last month, a UK defense and security think tank headquartered in London published similar claims. The study suggested that laws and powers underpinned by FATF recommendations are “being systematically misused by governments worldwide to freeze opponents’ bank accounts, gather sensitive banking information on non-profits and keep activists in lengthy pre-trial detention on trumped up charges of money laundering or terrorism financing.”

The think tank identified five specific abuses stemming from FATF recommendations: intelligence fishing and scraping, strategic bank account freezing, harassment and prosecution of organizations, politically motivated (pre-trial) detention, and lawfare for transnational repression. It reported 126 targets of abuse across 34 countries between 2013 and 2023, including watchdog organizations, journalists, activists, and independent businesses opposing governments. “Although instances of authoritarian abuses of the FATF standards are scattered across the globe, governments appear to be drawing from a common playbook of tactics,” said Stephen Reimer, an associate fellow at RUSI. “This cross-fertilisation of techniques is providing authoritarian regimes in particular with another set of tools to enable domestic repression, strengthening their hands at a time when democratic and liberal norms are already in retreat.”

By fLEXI tEAM