FATF consults on guidance relating to Proliferation Financing Risk Assessment and Mitigation

On 2 March 2021, the Financial Action Task Force (FATF) launched a consultation aimed at private sector stakeholders in relation to guidance which the FATF is developing regarding risks associated with the financing of proliferation of weapons of mass destruction (proliferation financing). This guidance follows updates made to the FATF’s requirements with respect to proliferation financing, whereby firms are now obliged to assess their proliferation financing risk exposure and impellent commensurate controls to effectively mitigate this.

In particular, the FATF are keen to understand from respondents whether:

• The guidance adequately distinguishes new expectations with respect to counter-proliferation financing which FATF now require firms to put in place, over and above existing measures in place from before 2020;
• The four proposed categories of risk indicator (customer profile, account and transactional activity, maritime sector and trade finance) are reasonable, or if respondents consider that these should be adapted or added to;
• The guidance pertaining to risk mitigation provides adequate clarity on the practical steps which firms should take to mitigate risks identified, or whether further guidance is needed; and
• The guidance is clear with regards to expectations around the treatment of a risk-based approach in the context of proliferation financing, in terms of high vs low risk customers, de-risking and financial inclusion.

Respondents are requested to reply to the consultation by 9 April 2021, and the FATF will consider responses received with a view to updating guidance text ahead of its next Quarterly meetings in June.