International standards
As indicated in last week’s column, the original publication of the Financial Action Task Force’s (FATF) Forty Recommen-dations took place in 1990. This was revised in 1996 and again seven years later in 2003. In between these two years, and following on the terrorist attacks in the United States on 9/11/2001, Eight Special Recommendations were added to the forty, and shortly thereafter the eight were expanded to the nine. Subsequent to the third round of Mutual Evaluations among Member States, the FATF in collaboration with what it has designated as FATF-style Regional Bodies (FSRBs) along with its Observer Organisations thoroughly revised and updated these recommendations and published them in 2012. This is, therefore, the updated definitive global structure for countering money laundering, the financing of terrorism and the proliferation of weapons of mass destruction.
This FATF 2012 document details the definitive international standards after taking into account those new and emerging threats it could identify in order to strengthen the recommendations in anticipation of these. In the document, FATF has focused very heavily on risk along with terrorist financing, and the proliferation of weapons of mass destruction.
The FATF 2012 International Standards are organized into seven major groupings. These are: Policies and Coordination; Money Laundering and Confiscation; Terrorist Financing and Financing of Proliferation; Preventive Measures; Transparency and Beneficial Ownership of Legal Persons and Arrangements; Powers and Responsibilities of Competent Authorities and Other Institutional Measures; and finally, International Coopera-tion. The main items addressed in each of these groupings are briefly annotated below, in the order indicated above.
Policies and Coordination
Under this grouping of international standards the main items that are indicated to be dealt with include 1) the identification and assessment of risks which members should routinely undertake, 2) the need for their continuous assessment of these, and 3) the follow up actions that should be taken by the authorities and financial institutions. This grouping also details the required levels of cooperation and coordination of national policies (both internally and externally) on anti-money laundering and combating terrorist financing (AML&CFT).
Money Laundering and Confiscation
A standard which FATF emphasises is the requirement that money laundering is comprehensively criminalised on the basis of the Vienna Convention and the Palermo Convention. Based on these two conventions together with the Terrorist Financing Convention, the competent authorities should have power to freeze, seize and confiscate property that is money laundered; the proceeds from, and/or connected to, money laundering offences; as well as the proceeds from (and/or connected to) terrorist financing. These should be allowed to take place with or without a criminal conviction along with the offender being required to demonstrate the lawful origin of the property alleged to be liable for confiscation.
Terrorist Financing and theFinancing of Proliferation
FATF adopts as its basis for criminalising terrorist financing, the Terrorist Financing Convention. This requires countries to fully and promptly implement targeted financial sanctions regimes required to comply with United Nations Security Council Resolutions on the subject. In similar vein they are required to respond to resolutions in regard to proliferation. It also directs countries to establish the adequacy of their laws and regulations in regard to non-profit organisations so that these do not become unwitting conduits for criminal and/or terrorist activities.
Prevention Measures
This grouping addresses the longest list of items, as it covers 19 of the 40 FATF Recom-mendations. The grouping includes 1) the treatment of financial institutions secrecy laws in relation to FATF Recommendations; 2) obligations in regard to customer due diligence and record keeping; 3) the treatment of politically exposed persons; 4) the handling of cross-border transactions (including correspondent banking, money transfer services, wire transfers and “new” financial products appearing in the market place); 5) internal controls and foreign branches/subsidiaries; 6) activities in designated “high risk countries”; and 7) reporting of suspicious transactions (including tipping-off and confidentiality). The grouping also deals with the treatment of related non-financial businesses and professions (lawyers, accountants, business consultants).
Transparency and Beneficial Ownership
This grouping addresses measures to prevent the misuse of legal persons and legal arrangements for purposes of money laundering and terrorist financing. This requires that there is “adequate, up-to-date and timely information” on beneficial ownership and control of legal persons/arrangements in both financial businesses and related non-financial businesses and professions.
Powers/Responsibilities of Competent Authorities
This grouping addresses the central issue of the power of enforcement/regulation by the competent authorities. It speaks to their required regulatory and supervisory functions and explicitly deals with the powers of supervisors/ the financial intelligence unit/law enforcement, as well as investigation and detection bodies (police, revenue, control of narcotics). It also addresses the collection of comprehensive statistics relevant to AML&CFT operations across the board. The recommendations also deal with guidance and feedback as well as the use of United Nations mandated sanctions to enforce compliance.
International Cooperation
As would be expected, this final grouping addresses the issues of international cooperation. It lays the foundation for cooperation through requiring countries to become immediate parties to the full implementation of the Vienna Convention (1988); Palermo Convention (2000); UN Convention Against Corruption (2003); the Terrorist Financing Convention (1999); the Council of Europe Convention on Cybercrime (2001); the Inter-American Convention Against Terrorism (2002); and the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and the Financing of Terrorism (2003). It also provides for mutual assistance among countries, especially in relation to such issues as information exchange; assets seizure and confiscation; extradition; and other forms of cooperation that might arise.
Next week I shall wrap-up this discussion of FATF’s global standards; while seeking to stress that it is the umbrella authority under whose rubric the Caribbean Financial Action Task Force (CFATF) regulates the participation of Guyana (and the rest of Caricom) in AML&CTF activities.
