ABSTRACT
This chapter discusses the concept and importance of legitimacy in anti-money laundering/counter-terrorist financing (AML/CFT) regulation. Without legitimacy, the Financial Action Task Force (FATF) may be unable to inspire acceptance and compliance to its regulatory standards. Legitimacy in designing rules goes to the root of the FATF’s drafting process. The FATF mutual evaluation process has been opined to be lacking legitimacy. To address the legitimacy concerns, Ghroshay asserts that the FATF adopted a risk-based approach system to ensure that countries’ developmental level and peculiarities are considered in the compliance assessment process. Frank Vibert asserts that changes to membership arrangements may confound the problems of input legitimacy, confusing epistemic failure and democratic deficit. The chapter explains the existence of a legitimacy crisis in AML/CFT regulation processes, as evidenced by the operations and strategy of international financial institutions/FATF in combatting these illicit crimes. The legitimacy crisis is examined in the context of rulemaking and implementation.
