Countering Money Laundering and Terrorist Financing : The International Standards

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Countering Money Launderingand Terrorist
Financing The International Standards
EuroMed Justice Programme Seminar 4 Financial
Operations of Money Laundering Amman, 17-20
July 2006
Rachelle BOYLE AdministratorFATF Secretariat
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Presentation overview

• The FATF.
• The 409 Recommendations.
• The role of key institutions.
• Criminal justice issues.

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• The FATF

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The FATF

• Established by the G-7 Summit in Paris in July
  1989 to examine measures to combat money
  laundering.
• Originally comprised the G-7 member States, the
  European Commission and 8 other countries.
• An inter-governmental body whose purpose is to
  establish international standards and promote
  national and international policies to combat
  money laundering (ML) and terrorist financing
  (TF).

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Membership of the FATF

• The 33 members of the FATF and the members of the
  FATF-style regional bodies (FSRBs) have all
  directly committed to implement the FATF
  standards.
• The Gulf Cooperation Council is a member of the
  FATF.
• The European Commission is a member of the FATF.

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Membership of the FATFThe FSRBs

• Together the 9 FSRBs comprise more than 150
  jurisdictions.
• The Middle Eastern and North African FATF
  (MENAFATF) is an FSRB comprising Algeria,
  Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco,
  Oman, Qatar, Saudi Arabia, Syria, Tunisia, United
  Arab Emirates and Yemen.
• Traditionally the FSRBs have been Observers. Now
  they may gain associate membership. 3 FSRBs are
  Associate Members of the FATF.

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The role of theFinancial Action Task Force (FATF)

• 409 Recommendations (the FATF standards)
• Establish international standards to combat money
• laundering and terrorist financing.
• Mutual evaluation system
• Assess compliance with the FATF standards.
• Typologies work
• Study methods and techniques of money laundering
  (ML) and terrorist financing (TF).

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• The 409 Recommendations

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The 409 RecommendationsA background

• 1990 The FATF 40 Recommendations are published.
• 1996 Revised to reflect evolving money laundering
• typologies.
• 2001 Expanded in October 2001 with 8 Special
• Recommendations on Terrorist Financing.
• 2003 The FATF conducted a thorough review of the
• Forty Recommendations.
• 2004 Added a 9th Special Recommendation.
• the 409 Recommendations

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409 RecommendationsThe FATF Standards

• Objectives of FATF Standards
• Provide a comprehensive set of measures to enable
  all countries to implement effective anti-money
• laundering (AML) / counter-terrorist financing
  (CFT)
• systems that will protect the world-wide
  financial system
• from misuse by organised crime and terrorist
  financiers.
• Foster good governance and longer term economic
  development.

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409 RecommendationsThe FATF Standards

• The importance of these objectives
• For countries Good governance, crime reduction,
  financial market stability, investor confidence,
  revenue collection, economic growth.
• For the private sector Financial institution
  soundness
• and integrity, public confidence, market
  distortions /
• competition.
• For the international community Impacts on
  organised crime and terrorist networks, promotes
  stability of international financial markets.

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The 409 RecommendationsOverview of the
standards

• The 40 Recommendations
• Legal systems criminalisation of money
  laundering, international cooperation.
• Comprehensive set of preventative measures to be
  taken by financial institutions and non-financial
  businesses and professions (customer due
  diligence, record keeping).
• Institutional framework and other measures
  (reporting of suspicious transactions,
  compliance, regulation and supervision,
  sanctions).
• International cooperation mutual legal
  assistance, extradition, information sharing.

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The 409 RecommendationsOverview of the
standards (continued)

• The 9 Special Recommendations on Terrorist
  Financing
• Ratify United Nations instruments.
• Criminalise terrorist financing.
• Freeze and confiscate assets.
• Report suspicious transactions.
• International cooperation.
• Protect against abuse of alternative remittance
  systems and abuse of non-profit organisations.
• Ensure originator information on wire transfers
• Detect cash couriers.

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• The roles of key institutions

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The 409 Recommendations Coordinated action by
key institutions

• Key institutions
• Law enforcement / prosecutorial authorities.
• Financial institutions and other businesses /
  professions.
• Financial intelligence unit (FIU).
• Financial sector supervisors / regulators.
• The importance of coordination
• Effective AML/CFT systems require coordinated
  action by the government agencies as well as with
  the private sector.
• International cooperation is key to effectively
  counter transnational money laundering and
  terrorist financing.

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The 409 Recommendations The role of law
enforcement and prosecutors

• Obligations in the 409 Recommendations
• Criminalise ML/TF.
• Freeze, seize and confiscate.
• International cooperation (mutual legal
  assistance and extradition).
• The importance of fulfilling these obligations
• Authorises investigation / prosecution of ML/TF
  offences.
• Weakens criminal / terrorist organisations by
  taking their profits and assets.
• Prevents criminals from escaping by crossing
  borders.

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The 409 Recommendations The role of the
private sector

• Obligations in the 409 Recommendations
• Customer due diligence.
• Record keeping.
• Suspicious transaction reporting.
• Internal controls.
• The importance of fulfilling these obligations
• Ensures that useful information is available to
  law enforcement / prosecutorial authorities.
• Increases transparency in the financial sector.
• Deters criminals.

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The 409 Recommendations The role of the
Financial Intelligence Unit

• Obligations in the 409 Recommendations
• Establish an FIU a national centre for
  receiving, analysing and disseminating
  disclosures of suspicious transactions other
  relevant information concerning ML/TF.
• The importance of this obligation
• Centralises information received from private
  sector entities.
• Focal point for financial intelligence.
• Facilitates international cooperation.
• Produces value-added analysis for investigation/
  prosecution.
• Provides guidance to the private sector.

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The 409 Recommendations The role of
supervisors and regulators

• Obligations in the 409 Recommendations
• Ensure that financial institutions are complying
  with the AML/CFT obligations.
• Ensure that proportionate and dissuasive
  sanctions are available for those financial
  institutions that are not complying with their
  AML/CFT obligations.
• The importance of fulfilling these obligations
• Facilitates detection of criminals who have
  infiltrated or gained control over financial
  institutions.
• Identifies areas where more guidance is needed.

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• Criminal justice issues

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Criminal justice issues

• Criminalise money laundering and terrorist
  financing.
• Freeze and confiscate criminal and terrorist
  assets.
• International cooperation.
• Government institutional framework (FIU,
  regulation and supervision).

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Criminal justice issuesCriminalise money
laundering and terrorist financing

• Criminalise ML TF (Recommendations 1 2,
  Special Recommendation II)
• At minimum, must cover 20 categories of offences
  and, where applicable, minimum threshold. Must
  also cover equivalent foreign offences.
• Need effective, proportionate and dissuasive
  sanctions.
• Must be sanctions for companies.
• TF must cover providing and collecting funds
  for terrorists, terrorist organisations and
  terrorist acts.

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Criminal justice issuesFreeze and confiscate
criminal and terrorist assets

• Confiscation and freezing (Recommendation 3, SR
  III)
• Complex but vital.
• Need to go below the criminal standard of proof.
• Meet the obligations set in both UNSCR 1267
  1373.
• Important to have capacity to act immediately to
  freeze.

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Criminal justice issuesInternational cooperation

• International Co-operation (Recommendations 36,
  27, 38, 39 40, SR V)
• Sign, ratify, implement 3 International
  Conventions.
• Mutual legal assistance.
• Freeze confiscate proceeds.
• Extradition - money laundering.
• Other forms of cooperation between competent
  authorities - FIUs, law enforcement,
  supervisors.
• Cooperation on TF.

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Criminal justice issuesInstitutional framework

• Authorities powers and other issues
• (Recommendations 26, 27, 28, 29, 30, 31, 32, 33
  34. SR VIII)
• Powers - FIUs, law enforcement, supervisors.
• Adequate structuring resources.
• Domestic cooperation / coordination.
• Comprehensive statistics.
• Companies / trusts beneficial owners.
• NPOs, ARS.

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For further information

• FATF website www.fatf-gafi.org
• Ms. Rachelle BOYLE
• Administrator
• FATF Secretariat
• rachelle.boyle_at_fatf-gafi.org
• Thank you