FATF Recommendations
Domain 4 is the FATF 40 Recommendations. The exam tests recommendation numbers and the control each one requires, often through a scenario rather than a definition.
Core rules
- R.1 is the risk-based approach; R.3 criminalises ML; R.4 covers confiscation; R.5 criminalises TF; R.6 requires targeted financial sanctions.
- R.10 is CDD; R.11 record keeping (at least five years); R.12 PEPs; R.13 correspondent banking; R.16 wire transfers.
- R.20 requires STRs to the FIU with no threshold; R.21 prohibits tipping off; R.22 extends AML/CFT to DNFBPs.
- R.23-25 cover transparency and beneficial ownership of legal persons and arrangements.
- R.36-40 cover international cooperation, including mutual legal assistance and extradition.
Worked example
A foreign PEP opens an account through an introducer. R.10 requires CDD, but R.12 adds senior-management approval, source-of-wealth and source-of-funds checks, and enhanced ongoing monitoring. R.13 is not engaged unless this is a correspondent banking relationship. The correct answer is not 'file an STR automatically'; suspicion still needs a factual basis.
Traps
- Assuming R.20 has a monetary threshold; it does not.
- Treating R.6 as the same as criminalising TF under R.5.
- Applying R.12 only to foreign PEPs; domestic and international-organisation PEPs are included.
- Forgetting that R.11 is a minimum, not a maximum, retention period.