Israel’s Addition to Financial Action Task Force Long Overdue

Data proves some existing FATF member countries have much deeper AML issues than Israel

Richard Paxton
Mar 3, 2016 · 3 min read

The worldwide Financial Action Task Force (FATF) on money laundering recently announced that Israel will join the organization as an observer starting in June 2016. Considering Israel’s tough stand on terrorists, adding it as an observer is a big step forward for the prestigious FATF, which sets global rules and standards for combating money laundering and terror financing. To date, only 34 countries make up its membership; countries that don’t meet FATF’s standards land on the task force’s blacklist.

In order for Israel to become a full member of FATF, it will have to pass comprehensive international inspection, showing that it has improved identification requirements at its financial institutions and expanded its AML regulations. The rewards for doing this work and joining the organization are that Israel will be able to participate in shaping global policy dealing with financial fraud and position itself as one of the leading countries in the worldwide fight against money laundering and terror financing.

Knowing the other 34 countries already accepted as full FATF members, I’m surprised it took this long to start the membership process for Israel.

The current membership list includes China, Hong Kong, Mexico and Malaysia, four of the most corrupt countries in the world, according to Transparency International’s latest data report. Let’s specifically focus on Mexico’s membership, considering its rich history of political and cartel corruption. According to the data:

  • 43 percent of the polled Mexican citizens felt the government’s efforts to fight corruption were ineffective, and 30 percent felt the government’s efforts were very ineffective
  • 79 percent of those polled felt corruption was a serious problem in the public sector
  • 55 percent reported paying a bribe to the judiciary
  • The institutions most identified by respondents as highly affected by corruption include the country’s political parties (91 percent) and police forces (90 percent)

Let’s forget the data for a second and simply look at the news headlines Mexico has generated over the last year, while acting as a standing member of FATF:

HSBC Sued For Money Laundering By Families Of Americans Murdered By Mexican Cartels

Money laundering probe targets Mexican actress in ‘El Chapo’ case

Mexico Going from Bad to Worse in Prosecuting Money Laundering

The City of Guadalajara Is the Money Laundering Capital of Mexico

Trust me, the list of headlines is too long to list here. Just to give you some perspective, a Google search for ‘Mexico + money laundering’ returned 1.18 million results.

Considering Israel’s long history of fighting against terrorism, I would have assumed the country would be a standing member of FATF before now. Transparency International’s 2015 Corruption Perceptions Index scored Israel a 61 out of a possible 100, placing it 32nd out of 168 countries surveyed. Compare that to Mexico, which scored a 35 out of a possible 100, placing it 95th out of the 168 countries surveyed. Or how about Malaysia, which scored a 50 and placed 54th?

Good for Israel for continuing to fight against financial corruption without recognition from its peers…until now. FATF membership will give it the opportunity to shape global policy around money laundering activities as well as a measure of credibility in the worldwide financial marketplace.

Richard Paxton

Written by

CEO of the Alacer Group. Sharing the latest news in financial crimes and best practices that enable financial institutions to prevent money laundering.

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