Naming and Shaming in Financial Regulation: Explaining Variation in the Financial Action Task Force on Money Laundering

Abstract

The Financial Action Task Force (FATF) on Money Laundering was founded as a fact-finding committee with a one-year mandate to catalog states’ anti-money laundering (AML) laws. The secretariat is comprised of roughly 15 people, many of whom are seconded from the Organization for Economic Cooperation and Development (OECD). Its product is not a convention but a nonbinding, vaguely written list of “40 + 9 Recommendations.” Relying on such “soft law” tools, its mission has been to promote greater financial regulation over a period of two and a half decades in which a strong current has run toward deregulation. Yet, FATF’s efforts at regime building have worked. Nearly all states have made political commitments to meet FATF recommendations. The FATF’s mandate was recently expanded until 2020 and the list of activities the group addresses has expanded from illicit drug trafficking in the earliest days to any illicit financial activity today, including nuclear proliferation, corruption, transnational organized crime, and maritime piracy.