The Legal Character Of Soft Law: A Critical Analysis Of FATF’s Role In International Anti- Money Laundering Regulation
- IJLLR Journal
- 1 day ago
- 2 min read
Pranaya Ramesh, O.P Jindal Global University
ABSTRACT
This paper explores how soft law functions within the international anti- money laundering (AML) framework, with a specific focus on the role of the Financial Action Task Force (FATF). Although FATF’s Recommendations are not legally binding, they have been widely adopted by states, raising questions about whether they function as binding in practice. The paper discusses this tension by comparing two perspectives: one that sees compliance as the result of coercion through tools like blacklisting, and another that highlights voluntary adoption based on legitimacy and global consensus. Drawing on examples and recent commentary, it argues that while some states may initially comply out of fear of reputational or economic harm, the lasting influence of FATF’s standards is better explained by the belief in their legitimacy and the benefits of international cooperation. The paper concludes that FATF’s soft law model reflects a more complex form of influence—neither entirely voluntary nor wholly coercive, but a mix of both, shaped by evolving global financial norms.
The fight against money laundering globally relies on recommendations and guidelines set by organisations like the Financial Action Task Force (“FATF”). Even though these rules aren't legally binding, most countries have adopted them into their own laws. This raises a question: do these rules essentially become binding because so many countries follow them? This essay aims to look closely at whether these recommendations effectively force countries to comply, despite not being official laws and delve into the effectiveness of these soft laws in the global fight against money laundering, examining the implications of widespread adoption for international cooperation and financial integrity.
Given the prevailing understanding that binding international legal rules govern only limited areas of the international financial system. Most of the international rules, guidelines, standards, and other arrangements that govern financial regulation are not of a legally binding nature and are therefore generally referred to as “international soft law.” Article 38 of the Statute of the International Court of Justice describes traditional sources of international law.
