Mutual Evaluation and Targeted Financial Sanctions
Domain 5 covers mutual evaluation and targeted financial sanctions. The exam tests how FATF/APG judge a country, what the 11 immediate outcomes mean, and how a bank executes a freeze without waiting for a court or customer explanation.
Core rules
- Mutual evaluation assesses technical compliance with the 40 Recommendations and effectiveness under 11 immediate outcomes; ratings run C, LC, PC and NC.
- Pakistan was placed on the FATF grey list in 2018 and removed in October 2022 after completing its action plan; APG remains the regional evaluator.
- TFS under UNSC 1267, 1988 and 1373 requires freezing without delay, prohibiting funds or services, and reporting to the competent authority.
- Domestic proscribed lists, such as NACTA's, are separate from UN lists but must also be screened.
- De-listing and exemptions follow the relevant UN/domestic process; a bank cannot invent its own exemption.
Worked example
Screening throws a 95% name match to a UNSC 1267 entity. The bank must freeze the account and any related funds immediately, without prior notice, and report to the regulator/FMU as required. It should not release funds because the customer denies the match or because a court order has not yet arrived. A false positive is resolved through the prescribed verification and unfreezing process, not by ignoring the hit.
Traps
- Treating TFS as an STR; the obligations are separate and can run in parallel.
- Waiting for investigation or conviction before freezing.
- Screening only the account holder, not directors, beneficial owners or counterparties.
- Confusing a mutual-evaluation rating with a supervisory enforcement rating.