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October 17, 2025Regulation & Governance1 citations

On the Performance‐Based Legitimacy of Financial Action Task Force: A Quantitative Exploration

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GCGuo Quan ChengBWBo Wen

Key Points

  • FATF's legitimacy appears weak, requiring enhancements across various dimensions of performance.
  • Compliance with FATF's recommendations shows weak correlations with effectiveness indicators and external controls.
  • The study develops an extended framework on legitimacy in non-binding institutions using quantitative data.
  • Implications may highlight the need for FATF reforms to accommodate lower-capacity states and enhance global legitimacy.

Abstract

ABSTRACT How legitimate is Financial Action Task Force (FATF)? We address this question with cross‐country evidence spanning performance‐wise aspects— standards, evaluation, strategy . FATF's legitimacy needs strengthening. Standards‐wise, compliance to FATF's Recommendations generally contributes to both FATF's and external effectiveness proxies, yet the latter has much weaker evidence. Granularly, FATF's Recommendations pose challenges for good‐faith developing states, since capacity constraints hinder compliance and effectiveness conversion. Evaluation‐wise , the effectiveness appraisal may be biased due to heavy reliance on compliance ratings, evidenced by weak correlations with external corruption control and financial transparency indicators. Strategy‐wise , though enhanced follow‐up boosts persistent compliance, the dominantly punitive strategy system is detrimental to good‐faith yet low‐capacity states. Theoretically, we build an extended framework on Mitchell's theory by deepening the analysis of effectiveness and justifying its applicability to non‐binding institutions. We also enrich the dialogue on the legitimacy of international organizations by presenting a quantitative, objective approach using official data.

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Cite This Study

Cheng et al. (2025) studied this question.

synapsesocial.com/papers/68f199bfde32064e504dcca7https://doi.org/10.1111/rego.70088
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