Anti-Money Laundering and Counter-Terrorist Financing Compliance Standards and Regulatory Expectations
Global standards, national rules
Know the hierarchy. The FATF's Recommendations are the international benchmark - they are not self-executing law; jurisdictions implement them, and mutual evaluations plus the International Co-operation Review Group assess how well. Other standard setters shape expectations: the Basel Committee on correspondent banking and customer due diligence, the Wolfsberg Group on private banking and screening guidance, and the Egmont Group on financial intelligence unit cooperation. Binding obligations come from national and regional instruments - the EU Anti-Money Laundering Directives, the US Bank Secrecy Act and PATRIOT Act, OFAC sanctions regimes, and local supervisory rules.
Recurring regulatory expectations: a risk-based approach that is documented and proportionate; senior management accountability and a compliance culture backed by resources; identification of beneficial owners behind legal persons; enhanced measures for PEPs, correspondent relationships and higher-risk geographies; sanctions and watchlist screening; timely reporting to the financial intelligence unit; and recordkeeping, typically five years after the relationship ends or the transaction occurs.
Traps: a risk-based approach does not permit an institution to opt out of controls it finds inconvenient, and supervisors reject one-size-fits-all programs applied without assessment; the 25 percent beneficial-ownership threshold is a common standard but varies by jurisdiction and does not automatically capture control-based ownership; de-risking whole categories of customers is a supervisory concern, not a solution; and FATF Recommendations are not directly enforceable in court.
Rule of thumb for reporting: cover the five Ws - who conducted the transaction, what was done, when, where, and why it is suspicious - plus how it was carried out. A narrative that recites only transaction data will fail review.