Financial Action Task Force (FATF)
FATF was chartered in 1989 by the Group of Seven industrial nations to foster the establishment of national and global measures to combat money laundering. It is an international policy-making body that sets anti-money laundering standards and counter-terrorist financing measures worldwide. Its Recommendations do not have the force of law. Thirty-four countries and two international organizations are members. In 2012, FATF substantially revised its 40 + 9 Recommendations and reduced them to 40. FATF develops annual typology reports showcasing current money laundering and terrorist financing trends and methods. See www.fatf-gafi.org.
Financial Action Task Force on Money Laundering in South America (GAFISUD – Grupo de Acción Financiera de Sudamérica)
A FATF-style regional body for South America, established in 2000. Members include: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Mexico, Panama, Paraguay, Peru, and Uruguay. See http://www.gafisud.info/home.htm.
Financial Action Task Force-Style Regional Body (FSRB)
FSRBs have forms and functions similar to those of FATF. However, their efforts are targeted to specific regions. Examples include the Caribbean Financial Action Task Force, the Eastern and Southern African Anti-Money Laundering Group, and the Middle East North Africa Financial Action Task Force.
Financial Institution
According to the FATF’s 40 Recommendations, a financial institution is any person or entity that conducts as a business one or more of the following activities or operations on behalf of customers:
  • Acceptance of deposits and other repayable funds from the public.
  • Lending.
  • Financial leasing.
  • The transfer of money or value.
  • Issuing and managing means of payment (e.g., credit and debit cards, checks, traveler’s checks, money orders and bankers’ drafts, electronic money).
  • Financial guarantees and commitments.
  • Trading in:
    • money market instruments (checks, bills, CDs, derivatives etc.);
    • foreign exchange;
    • exchange, interest rate and index instruments;
    • transferable securities and
    • commodity futures trading.
  • Participation in securities issues and the provision of financial services related to such issues.
  • Individual and collective portfolio management.
  • Safekeeping and administration of cash or liquid securities on behalf of other persons.
  • Otherwise investing, administering or managing funds or money on behalf of other persons.
  • Underwriting and placement of life insurance and other investment-related insurance.
  • Money and currency changing.
Financial Intelligence Unit (FIU)
A central governmental office that obtains information from financial reports, processes it and then discloses it to an appropriate government authority in support of a national anti- money laundering effort. The activities performed by an FIU include receiving, analyzing and disseminating information and, sometimes, investigating violations and prosecuting individuals indicated in the disclosures.
Financial Sector Assessment Program (FSAP)
Established in 1999 by the International Monetary Fund and the World Bank, the FSAP assesses jurisdictions for their financial systems’ strengths and vulnerabilities with an aim to reducing the potential for crises.
Forensic Accountant
Specializes in analyzing financial evidence and testifying as an expert witness in cases of white-collar crime, including money laundering.
Forfeiture
The permanent loss of private property or assets as a result of legal action by a government authority. Generally, the owner of the property has failed to comply with the law or the property is linked to some sort of criminal activity.
Freeze
To prevent or restrict the exchange, withdrawal, liquidation, or use of assets or bank accounts by governmental action. As defined by FATF’s “General Glossary” as they relate to the revised Recommendations of 2012: In the context of confiscation and provisional measures (e.g., Recommendations 4, 32 and 38), the term freeze means to prohibit the transfer, conversion, disposition or movement of any property, equipment or other instrumentalities on the basis of, and for the duration of the validity of, an action initiated by a competent authority or a court under a freezing mechanism, or until a forfeiture or confiscation determination is made by a competent authority.
For the purposes of Recommendations 6 and 7 on the implementation of targeted financial sanctions, the term freeze means to prohibit the transfer, conversion, disposition or movement of any funds or other assets that are owned or controlled by designated persons or entities on the basis of, and for the duration of the validity of, an action initiated by the United Nations Security Council or in accordance with applicable Security Council resolutions by a competent authority or a court.
In all cases, the frozen property, equipment, instrumentalities, funds or other assets remain the property of the natural or legal person(s) that held an interest in them at the time of the freezing and may continue to be administered by third parties, or through other arrangements established by such natural or legal person(s) prior to the initiation of an action under a freezing mechanism, or in accordance with other national provisions. As part of the implementation of a freeze, countries may decide to take control of the property, equipment, instrumentalities, or funds or other assets as a means to protect against flight.
Front Company
A business that commingles illicit funds with revenue generated from the sale of legitimate products or services. Criminals use front companies to launder illicit money by giving the funds the appearance of legitimate origin. Organized crime has used pizza parlors to mask proceeds from heroin trafficking. Front companies may have access to substantial illicit funds, allowing them to subsidize front company products and services at levels well below market rates or even below manufacturing costs. Front companies have a competitive advantage over legitimate firms that must borrow from financial markets, making it difficult for legitimate businesses to compete with front companies.
Futures
Contracts that require delivery of a commodity of specified quality and quantity at a specified price on a specified future date.