The Financial Action Task Force (FATF) held its annual plenary session in June, announcing the latest additions and deductions to and from its country watch-lists, as well as presenting eight objectives for the coming year.
Iran and North Korea hold their places firmly in the utterly non-compliant list with the FATF’s 40 recommendations on anti-money laundering and counter-terrorist financing (AML/CTF). Algeria, Ecuador, Indonesia and Myanmar have not made sufficient progress to get themselves off the list of countries under strict supervision by FATF for not making enough progress to change their legal frameworks. Ethiopia, Pakistan, Syria, Turkey and Yemen have and are still being monitored but it appears their efforts are moving in the right direction.
The eight objectives for 2014/15 set out by new FATF President Roger Wylie offer an insight into where the AML/CTF standard setter will focus its resources and could shed light on policy areas relevant to different business sectors.
- Raising the profile of the FATF in its 25th year and communicating its continued relevance – we could see the FATF having a stronger voice on the international stage, a sign that governance risk and compliance could be under the spotlight.
- Working with the FSRBs to address the issue of regulatory arbitrage – look out for legal changes. As the EU used to call it, ‘harmonisation’ of legal frameworks squeezes out the differences in national policies which makes it easier for an over-arching body to enforce the rules.
- Emphasising the effectiveness component of mutual evaluations – it is not what you do, it is the results of what you do that count. The Fourth round of Mutual Evaluations will have an effectiveness pillar; jurisdictions will be assessed on the impact their legal framework is having on achieving the standards set out in the 40 recommendations.
- Ensuring quality and consistency in mutual evaluation reports across the global network – FATF Style Regional Bodies (FSRBs), sometimes referred to as ‘associate members’, carry out much of the mutual evaluation legwork and the FATF wants to ensure that they are ‘clear, fair and explicit in their evaluations and reports.’
- Promoting meaningful engagement and open communication with the private sector – The FATF has embraced the idea of sharing information with the sector for which it sets the standards. The revision of the 40 recommendations in 2012 was at the behest of the private sector and followed lessons learned by AML/CTF practitioners. The standard setter is also working to a faster pace. Last year’s report on financial crime in new payment products and services took a few years to be researched, produced, approved and published. In the 12 months since then, the FATF has since published a new report on ‘virtual currencies’ which is a deeper look at a sector that was skimmed in the 2013 report. Look out for more initiatives from the FATF to engage with and learn from the private sector. This training course looks the concept in greater detail.
- Working with the G20 on areas of mutual interest, including corruption and beneficial ownership – Financial inclusion is another pillar of the G20 which could come up in the next 12 months. We could see some more work on the financial crime risks associated with new products designed with financial inclusion as an objective.
- Considering the risks associated with virtual currency and potential policy responses – Financial Crime Asia goes into more detail here.
- Continuing the FATF strategic view discussions, including prioritisation of the FATF’s work – A three year strategy for AML/CTF standards, according to the President’s report.