An exclusive article by Fred Kahn
The Financial Action Task Force (FATF) and other global standard setters play a decisive role in shaping the evolution of anti-money laundering (AML) policy. Their recommendations, evaluations, and updates serve as a blueprint for regulators and financial institutions worldwide, guiding the design of compliance programs and informing enforcement priorities. In the past two years, the landscape has shifted quickly—driven by emerging risks in digital assets, geopolitical upheaval, and growing concerns over illicit finance in the non-profit sector. For AML professionals, keeping pace with FATF policy shifts is no longer just a regulatory obligation, but a strategic imperative for resilience, reputation, and risk management.
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FATF policy shifts: methodology, supranational influence, and global standards
The focus keyword, FATF policy shifts, is central to understanding why compliance obligations have become more dynamic and wide-ranging. FATF’s recommendations are non-binding, but their influence is global. Jurisdictions that fail to meet its standards face public censure, “grey listing,” or even the threat of sanctions and exclusion from the global financial system.
Recent years have seen major updates to the FATF methodology, including enhanced scrutiny of virtual asset service providers (VASPs), the integration of environmental, social, and governance (ESG) factors, and a greater emphasis on effectiveness rather than just technical compliance. FATF’s “mutual evaluation” process is now more rigorous than ever, with on-site inspections, peer reviews, and follow-up actions aimed at improving both the letter and the spirit of compliance.
Supranational influence is also growing. The European Union, United Nations, and other bodies increasingly align their rules and guidance with FATF recommendations. This harmonization affects everything from the structure of beneficial ownership registries to due diligence for non-profits and cross-border payments. Institutions operating globally must be agile, updating internal policies and controls to remain compliant with both home and host country standards.
Key updates for virtual assets, non-profits, and emerging risks
FATF’s attention has turned to sectors and typologies once considered peripheral. Virtual assets, in particular, have been a focus. Guidance now requires VASPs to comply with full AML/CFT obligations, including KYC, transaction monitoring, and the much-discussed “Travel Rule,” which mandates information sharing on crypto transfers. Countries failing to supervise VASPs effectively risk negative ratings, which can impact national financial markets.
Non-profit organizations and charities also face new scrutiny. FATF’s latest recommendations call for a risk-based approach to monitoring, highlighting the dual need to prevent abuse while maintaining financial inclusion. Institutions are expected to identify higher-risk organizations, monitor transactions for red flags, and report suspicious activity—all while avoiding undue de-risking that could stifle legitimate charitable work.
Environmental and ESG risks have made their way into FATF evaluations, reflecting the increasing intersection of financial crime with environmental crimes, corruption, and human rights abuses. New typologies are emerging around carbon credit fraud, illegal wildlife trafficking, and the misuse of “green” finance vehicles for laundering illicit proceeds.
Technology and data are transforming how FATF and regulators approach compliance. Real-time analytics, information sharing platforms, and centralized registries enable both proactive supervision and retrospective enforcement. Financial institutions are encouraged to invest in technology that enables faster response to evolving threats, dynamic scenario testing, and more granular risk assessment.
How institutions adapt: building programs for evolving guidance
Adaptation to FATF policy shifts starts with leadership. Boards and senior management must treat global AML standards as a strategic priority, regularly reviewing guidance, risk assessments, and internal policies. Compliance programs should be flexible, allowing for rapid updates in line with new evaluations, typologies, or regulatory mandates.
Risk-based approaches are more important than ever. FATF encourages firms to move beyond “tick box” compliance and focus on the actual effectiveness of controls—are red flags identified and escalated? Is suspicious activity reported in time? Are new products, services, or customer types subject to robust due diligence?
Staff training, typology libraries, and industry engagement are essential for maintaining a resilient program. Financial institutions benefit from participating in public-private partnerships, staying engaged with regulator working groups, and contributing to the development of industry best practices.
Ongoing technology investment underpins all successful adaptation. Real-time screening, integrated transaction monitoring, and dynamic KYC platforms help institutions stay aligned with evolving standards. Institutions should continuously assess the effectiveness of these systems and benchmark their performance against industry leaders and regulatory expectations.
Navigating the next era of global AML policy
FATF and supranational policy shifts are redefining the AML landscape. Compliance is no longer a static, one-time exercise—it is an ongoing, adaptive process that requires vigilance, investment, and global awareness. Institutions that anticipate change, invest in technology, and cultivate a culture of compliance will be best positioned to thrive in this dynamic environment. By embracing both the spirit and the letter of FATF guidance, AML professionals can help protect their organizations, support global financial integrity, and lead the industry into a new era of risk management.
Related Links
- FATF Recommendations (as amended June 2025)
- Outcomes of the Joint FATF‑MONEYVAL Plenary (12‑13 June 2025)
- ESMA Final Guidelines on Knowledge & Competence under MiCA
- European Commission Delegated Regulation updating the EU AML High‑Risk Third Country List (June 10, 2025)
Other FinCrime Central Articles On This Topic
- Agreement Signed between AMLA and ECB to Strengthen EU Anti-Money Laundering Regime
- ESAs Set Clear Guidelines for Crypto-Asset Classification Under MiCAR
- Power Struggle Over EU Blacklist Sparks Uncertainty in Money Laundering Controls
- What ChatGPT Has To Say About the FATF 2025 Methodology Changes Compared to Previous Versions
