The origins of the AML/CFT framework date back to the 1980s, when the international community recognised that enormous proceeds from drug trafficking and organised crime were penetrating the legitimate financial system. The 1988 Vienna Convention was the first treaty to require signatories to criminalise money laundering linked to drug offences. In 1989, the G7 established the Financial Action Task Force, which issued the “40 Recommendations” in 1990—later becoming the global standard for combating money laundering and terrorist financing. The FATF monitors compliance through mutual evaluations and identifies high‑risk jurisdictions, exerting significant influence over the international financial system.

The scope of regulated sectors has expanded significantly over time, moving beyond traditional banking to include securities firms, insurers, payment institutions, virtual asset service providers, and designated nonfinancial businesses and professions—such as lawyers, accountants, estate agents, trust and company service providers, and dealers in precious metals and stones. Governments around the world require these sectors to carry out customer due diligence, ongoing monitoring, recordkeeping, and suspicious transaction reporting, applying a riskbased approach to manage money laundering and terrorist financing risks.

Financial institutions act as the first line of defence in the AML/CFT framework. They are required to establish written compliance policies, appoint a compliance officer and a money laundering reporting officer, conduct regular institutionlevel risk assessments, and apply enhanced due diligence for highrisk customers—such as politically exposed persons, individuals from sanctioned jurisdictions, or those with complex ownership structures. Staff must receive periodic training, and the effectiveness of the AML/CFT system must be subject to independent audit. Noncompliance can result in heavy fines, criminal prosecution, licence revocation, and serious reputational damage—demonstrating the binding force of this regime.