FATF updates methodology for assessing AML, CTF, and proliferation financing systems

The Financial Action Task Force assessment methodology sets out how evaluations measure a country’s implementation of the FATF Recommendations and its actions to tackle money laundering, terrorist financing, and the financing of proliferation of weapons of mass destruction. In practical terms, it is the framework that guides mutual evaluations, defining what assessors look for, how they structure their analysis, and how they determine both strengths and areas for improvement.

A central feature of the methodology is that assessments focus on two distinct areas: effectiveness and technical compliance. These two areas are related, but they measure different things. Technical compliance examines whether a country has the necessary laws, regulations, and legal instruments in place, in line with the technical requirements of the 40 FATF Recommendations. The methodology describes this legal, regulatory, and operational framework as the basis for an effective system to prevent criminal abuse of the financial system and to deprive criminals and terrorists of the proceeds and funding that enable harm.

Effectiveness, however, is described as the significant focus of each assessment. The methodology explains that effectiveness assessment is intended to ensure that countries are not only adopting laws and policies but also implementing them and making use of them. Countries must demonstrate that, in the context of the risks they are exposed to, they have an effective framework to protect the financial system from abuse. The methodology adds that there is a greater emphasis on major risks and context, to ensure that both countries and assessors focus on areas where risks are highest, rather than focusing only on lower-risk areas where it is comparatively easier to launch investigations and secure convictions.

To assess effectiveness, evaluation teams review 11 key areas known as Immediate Outcomes. These Immediate Outcomes serve as the structured lens through which assessors determine how well a country’s system is working in practice. The methodology, therefore, links effectiveness to outcomes and results rather than to the presence of rules alone.

The methodology has undergone revision and is applied across evaluation cycles. The FATF amended its assessment methodology in 2022 and commenced its fifth round of evaluations under this methodology in 2024. The methodology also notes that FATF-Style Regional Bodies will progressively use this methodology once they complete their previous round of evaluations. Alongside this, the methodology explains that the 2013 FATF Methodology and the procedures for the FATF Fourth Round of mutual evaluations continue to apply to countries being evaluated under the previous round and related follow-up processes. This coexistence reflects how evaluation rounds transition: some jurisdictions are assessed under the newer framework, while others remain within the earlier cycle and its associated processes.

The methodology also explains what a mutual evaluation report is intended to deliver. A mutual evaluation report provides an in-depth description and analysis of a country’s system for preventing criminal abuse of the financial system, alongside focused recommendations to further strengthen that system. The methodology frames the report as a starting point for the country, identifying priority actions needed to strengthen national frameworks and make AML, counter terrorist financing, and proliferation financing actions more effective. It also states that recommendations from mutual evaluation reports are more results-oriented, focusing on specific actions and timelines to address money laundering, terrorist financing, and the financing of weapons of mass destruction.

In addition to outlining the scope and structure of assessments, the methodology clarifies where it is used. It is used by the FATF itself, by FATF-Style Regional Bodies, and by other assessment bodies such as the International Monetary Fund and the World Bank. This reinforces that the methodology is designed for broad and consistent application, supporting comparability and quality across assessments conducted by different bodies.

The methodology is also described as being adopted in February 2022 and regularly updated. For context on evaluation cycles, it notes that the round of mutual evaluations based on the methodology adopted in 2022 will be a six-year cycle, which is significantly shorter than earlier rounds that lasted ten years on average. This indicates a move toward a more compressed evaluation rhythm, while still maintaining the dual focus on effectiveness and technical compliance.

Taken together, the methodology clarifies the logic of FATF evaluations: countries are assessed not only on whether they have the right legal and regulatory settings, but also on whether those settings produce effective outcomes against the most significant risks they face. The structure of the methodology, including the 11 Immediate Outcomes and the technical requirements across the 40 Recommendations, provides the common framework that underpins mutual evaluations and the priorities and timelines that follow from them.

Source: The 2022 and 2013 Methodologies for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT/CPF Systems