What is a Mutual Evaluation Report?

Mutual Evaluation Reports are detailed reports published by the Financial Action Task Force (FATF) analyzing how well a country combats money laundering, terrorist financing, and proliferation financing (ML/TF/PF).

📄How the process work 🔎

The FATF and the FATF-Style Regional Bodies (FSRBs) conduct evaluations 🔎 of the AML/CFT/CPF systems of their member countries 🌍 and make recommendations on their improvement.

(AML/CFT/CPF = Anti-Money Laundering, Countering Terrorism Financing, and Countering Proliferation Financing)

Want to learn more on the relationship between the FATF and FSRBs? Read here: https://lnkd.in/d_zfdaW4

🎯 What's Being Assessed? 🕵️‍♂️

Mutual Evaluation Reviews are based on the FATF Methodology, which includes two elements:

1️⃣ Effectiveness of a country's efforts: The focus is on whether the country has a strong system to stop criminals from generating and hiding illegally derived money and prevent financing of terrorism.

The assessment team looks at 11 Immediate Outcomes to determine the effectiveness of a country's AML framework.

2️⃣ Technical Compliance: The evaluation checks if the country's laws, regulations, and legal instruments meet the technical requirements of each of the 40 FATF Recommendations.

The results are published in the Mutual Evaluation Report in the form of Technical Compliance Ratings: 40 ratings – one for each FATF Recommendation. The rating scale is as follows:

👉 Compliant (C)

👉 Largely Compliant (LC)

👉 Partially Compliant (PC)

👉 Non-Compliant (NC)

👉 Not Applicable (NA)

The results are published in the Mutual Evaluation Report.

❓Does the process end there❓

No.

After the publication of the mutual evaluation report, each country undergoes a follow-up process to monitor its progress in addressing the identified deficiencies. This monitoring occurs over a period of several months or years.♻

Depending on the results of the mutual report, the follow-up process can be regular or enhanced (for grey-listed countries). 🕵️‍♂️

When the process is finalized, a follow-up report is published and includes potential re-ratings resulting from the follow-up process. ⚡

The Mutual Evaluation Report and the Follow-up reports can give the reader an idea of how strong a country’s AML/CFT/CPF framework is. ✅