Study: FATF Doesn't Do Enough to Evaluate Effectiveness, Monitor Potential Harms

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Date: 
February 18, 2014

A Jan. 30, 2014 study commissioned by the International Monetary Fund (IMF) found deficiencies in the evaluation process undertaken by the Financial Action Task Force (FATF). The FATF, a global intergovernmental organization that recommends anti-terrorist financing standards, evaluates government’s compliance with recommendations and publishes their ratings. The report found that, despite improvements in FATF’s standards and methodology for evaluation, a focus on “program effectiveness and outcome effectiveness” was still lacking. 

In particular, the study notes a lack of clear evidence that FATF’s policy recommendations actually lead to its goals of reducing terrorist financing, and little to no cost-benefit analysis has been done to identify potential harms created by the recommendations. “The FATF system has proceeded as if it only produces public and private goods” said the study, but “there needs to be more acknowledgement of the actual and potential financial costs of [recommendations], their potential abuse by authoritarian regimes...as well as potential negative impacts on NGOs and parts of civil society.”

The study goes on to offer three specific ways that FATF’s recommendations can harm civil society:

  1. Registration and reporting requirements for civil society groups will “increase the intrusion of state monitoring and thereby control their affairs.”
  2. “Administrative and financial costs,” created by regulatory compliance, “can threaten the survival of small associations.”
  3. “In Islamic societies, controls intended to restrict the financing of terrorism can deprive societies of locally delivered charitable activities” that help the local society.

These impacts on civil society can undermine FATF’s intended outcomes because it harms the very groups “that can advocate for clean politics and against corruption.”

More on the impact of FATF recommendations on civil society groups can be found here.