Developing an AML/CFT Strategy in the Context of International Standards

1
Developing an AML/CFT Strategy in the Context of
International Standards

• Heba Shams (World Bank) Nadim Kyriakos Saad
  (IMF)
• World Bank

2
The Scope of Discussion

• What is an AML/CFT strategy?
• How does a country develop a national AML/CFT
  strategy?
• What is the impact of international standards on
  domestic strategy making?

3
Two Central Questions

• Does every country need an AML/CFT framework?
• In a new global context there is a need for a new
  type of governance.
• Is there a scope for a domestic strategy in the
  context of international standards?

4
INTERNATIONAL INSTRUMENTS

• UN Convention Against Illicit Traffic in
  Narcotics Drugs and Psychotropic Substances
  (1988) (Vienna Convention)
• International Convention on the Suppression of
  the Financing of Terrorism (1999) (SFT
  Convention)
• UN Convention Against Transnational Organized
  Crime (2000) (Palermo Convention)
• UN Convention Against Corruption (2003) (Merida
  Convention)

5
INTERNATIONAL STANDARDS

• FATF Forty Recommendations on Money Laundering
  (2003)
• FATF Special Recommendations on Terrorist
  Financing (2001) (including Special
  Recommendation XI on requirements for cash
  couriers)

6
KEY ASPECTS OF A LEGAL FRAMEWORK

• Money laundering as a criminal offence
  (applicable to a wide range of predicate
  offences)
• Financing of terrorism as a criminal offence
• Regulatory and supervisory requirements for
  financial institutions
• Provisions requiring financial institutions and
  designated non-financial businesses and
  professions to undertake customer due diligence,
  maintain records, report suspicious transactions,
  and maintain internal procedures and controls

7
KEY ASPECTS OF A LEGAL FRAMEWORK

• Provisions for the establishment and operation of
  a national financial intelligence unit for
  receiving (and, as permitted, requesting),
  analyzing and disseminating suspicious
  transaction reports and related information
  regarding potential money laundering or terrorist
  financing

8
KEY ASPECTS OF A LEGAL FRAMEWORK

• Provisions requiring financial institutions to
  include accurate and meaningful originator
  information on fund transfers and related
  messages (such information to remain with the
  fund transfers and related messages through the
  payment chain)
• Provisions requiring persons providing a service
  for transmission of funds or value, including
  transmission through an informal funds or value
  transfer system, to be licensed or registered and
  subject to relevant AML/CFT requirements

9
KEY ASPECTS OF A LEGAL FRAMEWORK

• Provisions for strengthening the transparency of
  legal persons and arrangements such that the
  beneficial ownership and control of these legal
  persons and arrangements can be determined
• Provisions for preventing the use of non-profit
  organizations for the financing of terrorism

10
KEY ASPECTS OF A LEGAL FRAMEWORK

• Provisions for detecting cross-border
  transportation of currency and bearer negotiable
  instruments and enabling the authorities to stop
  or restrain currency or bearer instruments that
  are suspected to be related to money laundering
  or financing of terrorism, or that are falsely
  declared or disclosed
• Law enforcement measures for freezing, seizing
  and confiscating proceeds and instrumentalities
  of crime and terrorist property
• Provisions for strengthening international
  cooperation in mutual legal assistance and
  extradition
• Effective, proportionate and dissuasive sanctions
  against breaches

11
Strategy 101

• Strategy is a process of drawing a map between
  the present and the future as we see it.
• A good strategy should
• have clear objectives.
• be based on thorough understanding of the
  problem.
• be based on good analysis of the policy and
  implementation options and constraints.
• Have mechanisms of feedback and amendments.

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How to Develop a Strategy A Frameowrk

• Analytical work.
• Understanding the problem.
• How it is currently being handled and the gaps.
• The institutional and political context.
• Forming a strategy team.
• Sponsorship.
• Stakeholders
• Defining the ultimate goals and objectives of the
  intervention.
• Developing the policy and implementation design.
• For a good source on strategy in government see
  Strategy Survival Guidebook (Prime Ministers
  Strategy Unit, UK Government).

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AML/CFT Strategy The Analytical Work

• Understanding the problem
• The limitations of existing solutions.
• Institutional analysis.
• The relevance of comparative experience.
• International constraints and opportunities.
• Existing tools for analysing the ML and TF
  problems and the response.

14
AML/CFT Strategy Forming a Team

• Identifying a champion.
• The multidisciplinary nature of the team.
• Issues of institutional and sectoral culture.
• Serving the ownership objective.

15
AML/CFT Strategy Defining Goals

• What is the vision behind AML/CFT?
• Multiple Objectives.
• Preventing the abuse of the financial sector.
• Preventing the abuse of other businesses and
  professions.
• Facilitating international co-operation.
• Enhancing access to information for law
  enforcement purposes
• The persistent expansion of AML/CFT and its
  implications for strategy making.

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AML/CFT Strategy Policy and Implementation Design

• Policy options in AML/CFT
• The scope for policy choice in the context of the
  international standards.
• Different policy instruments
• Laws and Regulations.
• Economic instruments.
• Awareness raising.
• Creating incentives for self-regulation.

17
Policy Costs and Trade-Offs

• Cost of compliance.
• Access to finance.
• Restrictions on legitimate business transactions.
• Trade and services liberalisation.
• Procedural protection and safeguards.

18
Strategy and Inter-Agency Coordination

• Why is inter-agency coordination an issue?
• The role of strategy development in addressing
  the inter-agency problem.
• Stakeholders ownership and political commitment
  to AML/CFT

19
Conclusion

• Developing an AML/CFT strategy is a process that
  can contribute to resolving some of the main
  obstacles to the successful implementation of
  AML/CFT regimes.
• International standards do not substitute for the
  informed development of a domestic AML/CFT
  strategy.