Methodology for assessing compliance with fatf recommendations and the effectiveness of financial monitoring systems

Abstract

Rules combating money laundering and terrorism financing play a crucial role in establishing trust in the reliability and stability of the financial system, simultaneously acting as a protective mechanism against the infiltration of illicit elements. This dual function enhances the stability and reliability of the financial system, which is a crucially important element for fostering economic development and financial markets.
 The purpose of the article is a thorough analysis of the existing legal and institutional framework, as well as regulatory practices in the field of financial monitoring to determine their compliance with FATF regulations and identify opportunities for optimization and improvement.
 The research of evaluation of the effectiveness of financial monitoring systems was carried out on the examples of countries selected from different geographical regions and with different levels of development, including several countries in Africa, North and South America, Europe and Asia. Additionally, based on published consolidated assessment ratings of countries that underwent the latest round of FATF methodology assessments, we will identify those countries that received the highest ratings across 11 criteria: the United States and the United Kingdom (in 4 criteria), Israel and France (in 3 criteria).
 To incorporate the experience of foreign countries into Ukraine, the assessment of the effectiveness of the financial monitoring system is conducted by comparing it with both superior and inferior foreign practices, as well as with countries facing similar military-political situations. A profile of the effectiveness of systems countering money laundering and financing terrorism is constructed for various countries, including the United Kingdom, the United States, China, Georgia, Moldova, Pakistan, Poland, and Ukraine, following the FATF methodology.
 It has been determined that, for many foreign systems combating money laundering and terrorism financing, risks associated with the use of cash remain relevant. Additionally, inadequacies in combating terrorism financing have been identified, except for the United States and the United Kingdom. Reserves for increasing the effectiveness of national systems and systems combating the legalization of proceeds obtained through criminal means or terrorism financing have been identified.