Compliance with the FATF recommendations and how it effects suspicious activity reports

Abstract

The Financial Action Task Force (FATF) 40 recommendations suggest a legislative and institutional framework to prevent Money Laundering and Financing of Terrorism. The financial and human cost of implementing 40 FATF recommendations is very high and there has been no proper evaluation of the effectiveness of the FATF recommendations in increasing communications to the police. I identify a set of 9 FATF recommendations that have been largely ignored by legislators and target important issues: surveillance of Politically Exposed Persons, Beneficial Ownership, Transaction Reporting and Independence of Investigation. I explain compliance with the FATF recommendations, specially the sub set of 9 recommendations, with cultural, institutional and socio-economic variables. I introduce a new variable: the number of Political Mandates; to proxy the political environment of countries. I show that compliance with the FATF recommendations is positively related to increases in communications of Suspicious Activity Reports to the police for a sample of 23 countries. Finally, I show that the 9 special recommendations have a stronger impact on these communications than the FATF 40 recommendations.

Date of Award	27 Feb 2018
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Tommaso Ramus (Supervisor)