A number of inter-governmental and regional bodies currently monitor and publish information on country performance relating to Anti-Money Laundering / Countering the Financing of Terrorism (AML/CFT) for their members, the most prominent of which is the Financial Action Task Force (FATF).
The objectives of the FATF is to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. FATF has 37 member-countries and jurisdictions, spread over the following regions: Latin America and Caribbean, North America, Sub-saharan Africa, Europe, Asia and Oceania. The FATF has made 40 recommendations, on seven key areas, and its members conduct mutual evaluations on an ongoing basis to assess levels of implementation of the FATF Recommendations.
To help implement its recommendations, the FATF has identified high-risk and non-cooperative jurisdictions with deficiencies in their frameworks to combat money laundering and the financing of terrorism and proliferation. These jurisdictions are measured against their ability to uphold FATF standards and recommendations. The FATF works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. In November 2015, FATF has produced guidance on AML/CFT- related data and statistics, while studies and publications related to money laundering and terrorist financing methods and trends, contain useful data, statistics and information to help strengthen countries’ understanding of the risks related to transnational crimes and improve further the quality of the data collection.
Regional organizations are also acting in combatting money laundering and terrorist financing, by applying some of the FATF standards and recommendations on a regional basis. While FATF-style regional bodies (FSRBs) operate as autonomous bodies, the FATF and FSRBs share a common objective of combating money laundering and the financing of terrorism and proliferation.
There are regional bodies active in the Asia/Pacific, Caribbean, Eurasia region, Eastern and Southern Africa, Central Africa, Latin America, West Africa, Middle East and North Africa, and Europe.
Article 23 of the United Nations Convention against Corruption (the Convention or UNCAC) covers laundering of the proceeds of crime, and denotes a remarkable uniformity among the States which are party to the Convention with regard to the criminalization of money laundering.
UNCAC is now in the implementation phase of its Review Mechanism. The figure denotes the most prevalent challenges in implementation of the Convention by the countries under review. It summarises the implementation reports produced by the secretariat for the meetings of the Conference of the States party to the UNCAC. Article 23 ranks among the top six articles of chapter III where implementation challenges were identified by the parties to the Convention, during the first cycle of the UNCAC Implementation Review Mechanism (IRM) in 2010. Article 31 refers to freezing, seizure, and confiscation of assets. The graph reflects the difficulty States party to the Convention have had in implementing these articles.
The cost of complying with AML/ CFT and other requirements makes certain financial businesses, such as banking services, unproﬁtable and therefore the standards set should take into account the cost of doing business. Evidence gathered by the World Bank Group in 2015 through two surveys has indicated that banks might be cutting oﬀ money transfer operators’ access to banking services because the cost of complying with AML/ CFT and other requirements makes the business unproﬁtable. According to an IMF policy paper issued in April 2017, so far, cross-border payments have remained stable and economic activity has been largely unaffected, despite a recent slight decrease in the number of correspondent banking relationships. However, in a limited number of countries, financial fragilities have been accentuated as their cross-border flows are concentrated through fewer correspondent banking relationships or maintained through alternative arrangements.
As a result of the evidence gathered in 2015, the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) has elaborated proposals to encourage the use of know your customer utilities which would facilitate information sharing.
A 2016 report from the CPMI pointed out that there was no standardisation in the type and format of information in different “know your customer” (KYC) utilities and that such inconsistencies in the gathering of information limit the value of KYC utilities. Therefore, the CPMI decided to enhance the previous recommendation by inviting relevant standard setters such as the International Organization for Standardization (ISO) to consider defining a standardised minimum set of information and data (including the format) that all utilities should collect and that all banks have to be ready to provide to other banks which require the information and data.
In March 2016, the Financial Stability Board established a Correspondent Banking Coordination Group to help ensure implementation of an action plan agreed by the Group of Twenty to address the reduction in correspondent banking relationships. Revised guidance from the Financial Action Task Force in October 2016 sought to clarify the expectations with regard to enhanced due diligence, which has informed a revision of the guidance from the Basel Committee on Banking Supervision that is expected to be published in June 2017.
On the terrorist financing front, in December 2015, the FATF agreed that further concerted action needs to be taken urgently to strengthen global counter-terrorist financing regimes to combat the financing of these serious terrorist threats, and contribute to strengthening the financial and economic system, and security. FATF work focuses on the following areas, set out in detail in a FATF Consolidated Strategy on Combating Terrorist Financing:
- Improve and update the understanding of terrorist financing risks, in particular the financing of ISIL/Da'esh
- Ensure that the FATF Standards provide up-to-date and effective tools to identify and disrupt terrorist financing activity
- Ensure countries are appropriately and effectively applying the tools, including targeted financial sanctions contained in United Nations Security Council resolutions, to identify and disrupt terrorist financing activity
- Identify and take measures in relation to any countries with strategic deficiencies for terrorist financing
- Promote more effective domestic coordination and international cooperation to combat the financing of terrorism.