FATF ¦ R.34 Gui­dance and Feed­back

Recommendation 34: Turning Guidance and Feedback into Real AML Impact

Guidance and feedback are often treated as “nice-to-have” extras in an anti-money laundering (AML) framework. In reality, they are one of the most powerful tools supervisors have to improve the quality of monitoring and reporting across an entire financial system. Recommendation 34 focuses precisely on this point: competent authorities, supervisors, and self-regulatory bodies (SRBs) should not only enforce rules, they should also guide and support the firms that apply them.

Understanding Recommendation 34

At the heart of Recommendation 34 is a simple idea: rules alone do not guarantee effective compliance. Financial institutions and designated non-financial businesses and professions (DNFBPs) operate in complex environments, with evolving risks and limited resources. They need practical help to interpret national AML/CFT measures and apply them in real cases.

The recommendation therefore expects:

• Competent authorities, supervisors, and SRBs to issue guidelines; and
• Those same bodies to provide feedback.

The goal is to help regulated entities understand how best to combat money laundering and terrorist financing, and especially how to detect and report suspicious transactions.

From Legal Text to Practical Guidance

National AML laws and regulations tend to be high-level and principle-based. They set out obligations around customer due diligence, transaction monitoring, record-keeping, and suspicious transaction reporting (STRs or SARs), but they are not step-by-step manuals.

Guidelines bridge this gap. They explain, in practical terms, what an effective AML program looks like for different sectors and risk profiles. For example:

• How a small law firm should assess the money laundering risk of a new corporate client.
• What a payment institution should consider when calibrating thresholds in its monitoring system.
• What type of unusual patterns should prompt an internal escalation and possibly a suspicious transaction report.

When supervisors publish case studies, typologies, and red-flag indicators, they are effectively turning abstract legal requirements into operational playbooks that compliance teams can use.

Bastian Schwind-Wagner _Follow

"Guidance and feedback under Recommendation 34 are not simply support tools; they are core drivers of an effective AML/CFT framework. When authorities share clear expectations, practical examples, and timely typologies, institutions can design controls that truly match their risk exposure and business model.

At the same time, a strong feedback loop around suspicious transaction reporting improves both the quality of reports and the efficiency of investigations. Firms that use this feedback to refine their detection scenarios and training are better positioned to identify real threats and avoid both over-reporting and blind spots."

Why Feedback Is Just as Important as Rules

Feedback is where Recommendation 34 becomes truly powerful. Without feedback, firms are forced to guess whether their suspicious transaction reporting is useful, excessive, or missing key risks.

Feedback can take several forms, for example:

• General feedback on the overall volume and quality of reports from a sector.
• Thematic feedback following a review or inspection, where the authority shares common deficiencies and better practices.
• Information on typologies and patterns derived from past reports and investigations, which helps institutions sharpen their detection scenarios.
• Anonymised examples of good and bad suspicious transaction reports to show what makes a report actionable for a financial intelligence unit (FIU).

This feedback loop helps institutions continuously improve. It also reinforces the message that suspicious transaction reports are not a box-ticking obligation, but a central input to law enforcement and national security.

Strengthening Suspicious Transaction Detection

Recommendation 34 singles out one area as particularly important: the detection and reporting of suspicious transactions. This is where most AML programs are tested in practice. If firms cannot identify and report suspicious activity, the entire national framework loses much of its effectiveness.

Good guidance and feedback can help firms to:

• better understand what “suspicious” means in practice in their business model and customer base;
• distinguish between genuinely suspicious activity and behaviour that is unusual but explainable;
• reduce both over-reporting (which burdens FIUs with low-value reports) and under-reporting (which allows serious cases to go unseen);
• adapt transaction monitoring rules and machine-learning models to new risk trends quickly, based on the patterns seen by authorities.

Over time, this leads to more targeted, higher-quality suspicious transaction reports, which can significantly support investigations into money laundering, terrorist financing, and related predicate offences.

The Role of Different Actors: Authorities, Supervisors, and SRBs

Recommendation 34 is deliberately broad in describing who should provide guidance and feedback. This reflects the diversity of national systems.

• Competent authorities often include the ministry responsible for AML policy and the FIU. They are usually best placed to publish national risk assessments, typology reports, and cross-sector guidance.
• Supervisors (such as central banks, financial regulators, or gambling commissions) oversee compliance in specific sectors. They can offer sector-specific expectations, examples, and findings from on-site inspections.
• Self-regulatory bodies (SRBs), such as bar associations or professional accountancy bodies, play a crucial role for DNFBPs. They understand the realities of legal, accounting, real estate, and other professional services, and are well positioned to tailor guidance to those contexts.

For supervised entities, this mix of sources can sometimes feel confusing. However, coordinated guidance and shared feedback across these bodies helps ensure consistency. Ideally, authorities and SRBs align their messages, use similar terminology, and refer clearly to the same national risk priorities.

Practical Implications for Financial Institutions and DNFBPs

For firms subject to AML/CFT requirements, Recommendation 34 translates into several practical expectations.

First, they should actively use the available guidance. Too often, supervisory or FIU publications are treated as background reading. In reality, they should inform:

• the firm’s business-wide risk assessment;
• the design of customer risk scoring models;
• transaction monitoring scenarios and typologies;
• internal training materials and case studies;
• escalation procedures and suspicious transaction reporting templates.

Second, firms should treat supervisory feedback as a key resource for improvement. When regulators highlight gaps, trends, or strong practices, that is a direct insight into how the firm’s AML efforts are viewed externally. Ignoring this feedback is risky; incorporating it is an opportunity to strengthen the control framework and reduce the likelihood of enforcement action.

Third, firms should be prepared to demonstrate how they have used guidance and feedback in practice. During inspections, supervisors increasingly ask questions like:

• Have you reviewed the latest national risk assessment and how has it influenced your own risk assessment?
• Which recent typology reports have you considered when updating your transaction monitoring scenarios?
• How did you respond to feedback from the FIU on the quality of your suspicious transaction reports?

Having clear, documented answers to these questions shows a proactive and mature compliance culture.

Benefits for the Wider AML System

When Recommendation 34 is properly implemented, the benefits extend beyond individual firms:

• authorities gain better-quality suspicious transaction reports, which improve analysis and case-building;
• investigations can move faster, as reports contain more relevant and structured information;
• risk-based supervision becomes more effective, as supervisors can allocate resources based on real-world reporting behavior and identified weaknesses;
• as patterns and typologies are shared more widely, criminals find it harder to exploit blind spots between sectors or professions.

Over time, this kind of informed collaboration can significantly enhance a country’s ability to identify and disrupt money laundering and terrorist financing.

Challenges and Areas to Watch

Despite its clear value, implementing Recommendation 34 is not without challenges.

• Resource constraints: Supervisors and SRBs need specialist staff and time to develop meaningful guidance and provide tailored feedback, beyond the basic legal minimum.
• Keeping guidance up to date: Risk landscapes change quickly, with new technologies, products, and cross-border channels. Outdated guidance can be worse than no guidance at all.
• Balancing specificity and flexibility: Authorities must give enough detail to be useful without being so prescriptive that they stifle risk-based judgment.
• Ensuring consistent messages: If different authorities issue conflicting or overlapping instructions, firms may struggle to know which expectations to prioritize.

These challenges do not undermine Recommendation 34; instead, they highlight why a structured, strategic approach to guidance and feedback is essential.

Looking Ahead: Making the Most of Recommendation 34

For regulators and SRBs, Recommendation 34 is a reminder that effective AML/CFT supervision is not just about checking compliance and imposing sanctions. It is also about educating, informing, and partnering with the private sector to identify and respond to risk.

For financial institutions and DNFBPs, it is a call to shift mindset: guidance and feedback are not just regulatory noise. They are one of the best indicators of what matters most to authorities and where risk is actually materializing.

Used well, Recommendation 34 helps transform AML from a purely rules-driven exercise into a dynamic, information-driven system, where supervisors and reporting entities work together to detect and disrupt financial crime more effectively.

Dive deeper

• FATF ¦ The FATF Recommendations ¦ Link
• FATF ¦ Luxembourg’s measures to combat money laundering and terrorist financing ¦ Link