Germany: Money laundering to finance crime, terrorism grows

German police and financial authorities have warned of an increase in money laundering. The numbers have more than tripled in recent years and the methods are becoming ever more sophisticated.

Authorities in Germany have warned of a steady increase in money laundering. Recorded cases went up by 23 percent in 2009 with a total number of 9,046, according to figures presented by the financial market watchdog BaFin and the BKA federal police agency on Wednesday. The number of cases has tripled since 1995.

BKA head Joerg Ziercke said one of the main reasons for the increase was the rising number of financial intermediaries who offer their private bank accounts for money laundering. For an often small fee, individuals agree to send money abroad or to other financial intermediaries who then channel the money to foreign accounts.

Fake Internet purchases

"These people are being approached through the Internet," Ziercke said at a press conference on Wednesday. "They are asked to offer their accounts for transferring money for products allegedly bought on the Internet."

"The products are then not being delivered, and the owner of the account gets a commission. That way the money that's been transferred is channelled … into accounts outside of Europe."

In almost one-third of investigations into organized crime, there are cases of money laundering, Ziercke said. Nearly 100 of the cases recorded in 2009 were linked to suspected financing of terrorism.

More international cooperation needed

The BKA said better international cooperation could help quell the problem.

Within Germany it's the job of financial market watchdog BaFin to be on the lookout for illegal transactions or money transfers that reek of money laundering. Increased international cooperation aside, BaFin also called for tougher fines and sentences.

"Compared to the authorities in the US or in London, it's almost a joke when you look at the fines that we can impose here in Germany," BaFin head Jochen Sanio said.

Fines in Germany are limited to a maximum of 100,000 euros ($128,000), while abroad, Sanio said, authorities can easily charge millions if they uncover a significant case.

Author: Andreas Illmer (AFP/AP/dpa)

Editor: Nancy Isenson

Source: Deutche Welle

Pakistan steps up anti-terror-financing measures

The Securities and Exchange Commission of Pakistan (SECP) has directed stock exchanges and financial companies to embrace anti-money laundering and anti-terror financing measures proposed by the multi-national Financial Action Task Force (FATF).

Through a circular issued August 30 to the Karachi, Lahore and Islamabad stock exchanges, National Commodity Exchange Limited and the National Clearing Company, the SECP said all listed companies should abide by the FATF’s instructions for fighting money laundering and terror financing. The instructions were not made available to the public.

The circular also discloses that the FATF had not received a commitment yet from the Iranian and South Korean governments to eliminate the possibility of misuse of their financial firms by unscrupulous elements.

The FATF has identified certain jurisdictions in which financial institutions need to apply measures against money laundering and terror funding and consider the risk associated with not complying, the SECP advised.

“On the advice of the SECP and the State Bank of Pakistan, we often verify the credentials of our customers to ensure that Al-Qaida or the Taliban could not use our banks for financial transactions,” Sirajuddin Aziz, CEO of the Bank Alfalah Limited, told Central Asia Online.

Pakistani banks have tough criteria to open accounts

The banks say they adopt tough criteria for opening the account of a charity organisation, a company or an individual.

“We don’t open a new bank account until we know that the customer is a genuine person and a taxpayer and that money laundering and terror financing are not his or her source of income,” said Mukhtar Ahmed, manager of the NIB Bank, West Wharf, Karachi.

The bank requires the depositor to sign a new account opening form, designed by the SECP and State Bank of Pakistan to provide maximum disclosure about the depositor, he said.

“The SECP directed more than 600 companies being traded on the stock markets to take further measures to eradicate the possibility of money laundering and terror financing through Pakistani financial companies,” Ahmed Nabil, COO of the JOVC financial services firm, told Central Asia Online August 31.

The SECP and FATF have asked Pakistani companies not to deal with dubious international companies that support money laundering and terror financing.

“We are monitoring our records on our clients and getting the National Tax Numbers (NTNs) and Computerised National Identity Cards (CNICs) to make sure that they are not involved,” Nabil said.

Pakistani business leaders vow to monitor suspicious practises

The CEOs and COOs of the Pakistani companies are also submitting affidavits to the SECP in which they vow to enhance monitoring and take additional measures to stamp out the targeted practises.

The SECP said it would take strict action against financial firms that did not patch the loopholes in their operations.

Pakistani banks, investment companies, leasing entities, stock brokerages and currency exchange companies already have adopted a number of measures, Nabil told Central Asia Online August 31.

However, the financial companies in Pakistan will have to enforce more measures suggested by the FATF, he said.

Nabil pointed out Pakistan had witnessed a substantial jump in the inflow of remittances in the last few years, mainly because enforcement of anti-money-laundering measures encouraged overseas Pakistanis and investors to use banking channels rather than the hawala (or hundi) informal cash transfer system that existed for decades.

The annual total soared from US $2 billion before 2001 to over US $8.5 billion in 2009-2010, he said.

Source: Central Asia Online

Singapore to Strengthen Anti-Money Laundering Rules

by Mary Swire, Tax-News.com, Hong Kong

During a recent speech for the Wealth Management Institute, the Managing Director of the Monetary Authority of Singapore (MAS), Ravi Menon, said that Singapore welcomed legitimate funds from Europe, or anywhere else, seeking to be managed out of Singapore, but not illicit funds seeking shelter from scrutiny.

He considered that Singapore is seen to be the ideal base for the intermediation of that growing Asian wealth due to its political and economic stability, transparency in governance, and sound and predictable regulation, together with strong capabilities in asset management, foreign exchange and derivatives trading, coupled with deep and liquid capital markets.

However, Menon stressed that the financial sector must be kept clean.

“While cross-border crimes have become increasingly sophisticated, Singapore is vulnerable to being used as a conduit for illicit funds,” he added. “We need to guard against financial flows relating to corruption, terrorism, politically exposed persons, and weapons proliferation. More recently, efforts by various governments to strengthen tax enforcement have increased the risk of undeclared monies flowing to Singapore.”

Menon confirmed that MAS is fully committed to safeguarding the integrity and reputation of Singapore as a clean financial centre, and already has a strong legal and regulatory framework on anti-money laundering (AML) and counter financing of terrorism (CFT), in line with international standards; and a rigorous regime of supervision to monitor compliance by financial institutions.

Having reviewed Singapore’s regulations and supervisory and enforcement actions, the Financial Action Task Force assessors concluded: “Singapore’s AML/CFT sanctions regime is effective, proportionate, and dissuasive.”

Nevertheless, Singapore is now considering a tougher penalty regime for violations of AML/CFT; intends to make criminal the laundering of proceeds from tax offences to send a clear message that it neither wants nor will tolerate illicit inflows; and will step up its enforcement resources to deal with suspicious transactions reported by financial institutions.

It will also strengthen cross-border co-operation to fight trans-national financial crime, and will step up vigilance against suspicious flows of funds arising from external developments.

With regard to the latter, Menon was sceptical that Singapore is benefiting from an inflow of hot monies, “especially from Europe, supposedly following the adoption of enhanced exchange of information provisions among European Union countries,” as tales of large inflows of funds from Europe into Singapore are “vastly exaggerated.”

He pointed out that, “according to the Boston Consulting Group, European wealth is estimated at just 10% of the USD900 billion offshore assets under management in Singapore and Hong Kong. … As one banker puts it, the emergence of Singapore and Hong Kong as wealth management hubs has to do with more Asian wealth being retained in Asia rather than a flight of new funds to Asia.”

Nonetheless, he concluded that Singapore “must remain vigilant against potential negative spill-overs of illicit funds triggered by external developments. Recently, when Switzerland signed bilateral treaties with the United Kingdom and Germany on tax-related matters, MAS issued a set of guidelines as a pre-emptive step to guard against any potential inflows of illicit funds.”

MAS guidelines reminded financial institutions that they have a key role to play in preserving the integrity of our financial system, and safeguarding it from being used as a haven for illegitimate funds or as a conduit to disguise the flow of such funds. “This vigilance,” he emphasized, “should be extended to all forms of suspicious flows, be they from tax evasion or corruption.”

Source: Tax News

US banks fight plan to share details abroad

A US financial crime agency’s plan to let foreign police seek information from American banks is drawing opposition from groups representing US financial institutions.


The proposed rule by the Financial Crimes Enforcement Network, a division of the treasury department, would also permit US state and local law enforcement authorities to make similar information-sharing requests of banks.

Regulations adopted after the 9/11 attacks in 2001 allow only federal law enforcement agencies, through FinCEN, to request such information.

FinCEN can require US financial institutions to search their records to determine whether they have done business with individuals suspected, based on credible evidence, of terrorism or money laundering.

Written comments on the proposed expansion of the rule were due on December 16, and more than half a dozen organisations, including the American Bankers Association and the Credit Union National Association, said the plan is intrusive.

In a 13-page letter, ABA vice-president Robert Rowe called the proposal “premature and unfounded” and said it represented a “dangerous broadening” of the information-sharing process.

“There is absolutely no indication that the extraordinary power available under the 314(a) data-match programme was ever intended by Congress to be put at the service of foreign countries,” he wrote.

The Credit Union National Association, a trade organisation that represents thousands of state and federal credit unions, said it was worried about the burden the rule would impose on its members.

FinCEN has estimated that information requests under the rule would require no more than 72 additional hours per year per institution to process. The association said many of its small members cannot afford to automate their processes.

Source: The Financial Express

Ukraine could go back on international financial blacklist in February, says financial monitoring committee

Ukraine in February 2010 could be again included on the FATF blacklist (the Financial Action Task Force), if it does not approve a new basic profile law by December 31, according to a statement posted on the Web site of the State Committee for Financial Monitoring of Ukraine.


"In spite of the seven-year active work of the Ukrainian government and the parliament and the long-awaited approval of a new basic law by 393 people's deputies in November 2009, Ukraine has been included in 25 countries, which have a real chance of getting outside the civilized financial world and feel the burden of fines," the statement reads.

According to the committee, the risks grew as the Ukrainian president had vetoed the new edition of a law on opposing money laundering and financing terrorism.

As reported, the Verkhovna Rada, Ukraine's parliament, on November 6 amended the law on money laundering, significantly expanding the list of subjects to be monitored first. The Association of Ukrainian Banks called to veto the law, considering its points to contradict a number of articles of the Constitution of Ukraine.

The Ukrainian president vetoed the law on December 8. According to the head of state, the law empowers the State Committee for Financial Monitoring with too much authority to collect information. According to the president'sestimation, such authority does not meet the realistic needs for fighting economic crime and financing terrorism.

Source: The Kyiv Post

The last two years have not been successful for FinCEN

The Annual Report of Financial Crime Enforcement Network for Fiscal Year 2009 has been released. A first look at the report shows the number of all reports received by FinCEN fell. About 16.7 million reports were filed pursuant to BSA requirement in 2009. It means there were over 1 million fewer reports in 2009 than 2008. From all the reports that FincEN receives, only the Suspicious Activity Reports (SARs) saw a very slight increase from 2008. There were 1.3 million SARs filed in 2009. SARs are reports that are filed in connection with transactions that financial institutions know, suspect, or have reason to believe may be related to illicit activity. On the other hands, the largest decrease was in the Currency Transaction Reports (CTRs). There were only 14.9 million CTRs in 2009, compared to about 16 million in 2008. CTRs are reports are that are filed for currency transactions exceeding $ 10,000.


FinCEN may consider these figures a success. However, the failures of the financial system during 2008 and 2009 tell a different story. Has FinCEN done the job according to its mission? FinCEN is an institution whose job is to enhance U.S national security, deter and detect criminal activity, and safeguard financial systems from abuse by promoting transparency in the U.S and international financial systems. The failures of 2009 and 2008 show that FinCEN has not performed well. It has not lived up to its mission. Is 2010 going to be different?

by Arben KOLA

Source: The Examiner

Two Lebanese currency traders deny U.S. charges of criminal links

Two firms designated by the U.S. Treasury for their alleged roles in an international drug trafficking and money laundering ring denied Thursday involvement in illegal activities.

The U.S. government took the decision Wednesday to label Ayman Joumaa, as well as nine people and 19 companies connected with him as Specially Designated Narcotics Traffickers in a racket which reportedly netted as much as $200 million a month.

Two Lebanese currency traders, Hassan Ayash Exchange and Elissa Exchange, which were both named in the Treasury’s designation, denied knowledge of Joumaa’s activities.

“We are terribly shocked by this news. I don’t know how our company’s name got involved in this work and the reports,” Iman Kharoubi, of Elissa Exchange, told The Daily Star.

“We work in Lebanon [and The Democratic Republic of] Congo and Benin in Africa. But we do not know who Ayman Joumaa is; we don’t have anything to do with him.”

Hassan Ayash, the owner of the exchange firm, denied any wrongdoing, but did admit to knowing Joumaa, who the U.S. designated under the Kingpin Act and will now struggle to access international financial transactions.

“For us it was a surprise today to hear about this story,” Ayash told The Daily Star. “We have no knowledge of where Ayman Joumaa is currently and we have no contact with him. But we know him in person.”

Beirut’s Caesar’s Park Hotel was also designated by the Treasury after it was alleged Joumaa, the manager and CEO, “uses [the hotel] as a location to broker drug trafficking and money laundering activities.” The hotel declined to comment on the accusation.

Both exchange companies have contacted Lebanon’s Central Bank for advice following financial sanctions, but Ayash was not unduly worried about the potential negative effect U.S. punitive measures could have on business.

“Actually there would be no consequences whatsoever on our work, since our work is transparent and we work with several banks in the U.S.,” he said.

Kharoubi was less optimistic. “Our transactions are clear and transparent, but our work would be terribly affected,” he said. “Our transactions go through several U.S. banks and car companies all over the United States. Under U.S. government supervision, our products and cargos are monitored within the United States.”

Washington has said it would reconsider its financial support for Lebanese institutions if a cabinet blessed by Hezbollah is formed by Prime Minister-designate Najib Mikati.

Both firms said the financial measures taken against them were unlikely to be linked to cabinet uncertainty.

“We are not affiliated with any party in the country. I do not think that this is related to regional politics,” Kharoubi said.

“It is too early yet, since the news just came in, to actually know if there are any political and economic indications in the American reports,” Ayash added. “We cannot say whether this action is related to the recent developments in Lebanon.”

The United States has already blacklisted several Lebanese companies for their suspected links to Hezbollah. – Additional reporting by Van Megeurditchian

Source: The Daily Star

Improving Global AML/CFT Compliance: on-going process

As part of its on-going review of compliance with the AML/CFT standards, the FATF has to date identified the following jurisdictions which have strategic AML/CFT deficiencies for which they have developed an action plan with the FATF. While the situations differ among each jurisdiction, each jurisdiction has provided a written high-level political commitment to address the identified deficiencies. The FATF welcomes these commitments.

A large number of jurisdictions have not yet been reviewed by the FATF. The FATF continues to identify additional jurisdictions, on an on-going basis, that pose a risk to the international financial system. The FATF has additionally begun initial reviews of a number of other jurisdictions as part of this process and will present its findings later this year.

The FATF and the FSRBs will continue to work with the jurisdictions noted below and to report on the progress made in addressing the identified deficiencies. The FATF calls on these jurisdictions to complete the implementation of action plans expeditiously and within the proposed timeframes. The FATF will closely monitor the implementation of these action plans and encourages its members to consider the information presented below.

Angola

In February 2010, Angola made a high-level political commitment to work with the FATF to address its strategic AML/CFT deficiencies. Since then, Angola has taken steps towards improving its AML/CFT regime, including by establishing a legal framework for the FIU. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. Angola should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); and (3) establishing and implementing an adequate legal framework for identifying, tracing and freezing terrorist assets (Special Recommendation III). The FATF encourages Angola to address its remaining deficiencies and continue the process of implementing its action plan.

Antigua and Barbuda

In February 2010, Antigua and Barbuda made a high-level political commitment to work with the FATF and CFATF to address its strategic AML/CFT deficiencies. The FATF has determined that certain strategic AML/CFT deficiencies remain. Antigua and Barbuda should continue to work on implementing its action plan to address these deficiencies, including by: (1) implementing an adequate legal framework for identifying and freezing terrorist assets (Special Recommendation III); and (2) continuing to improve the overall supervisory framework (Recommendation 23). The FATF encourages Antigua and Barbuda to address its remaining deficiencies and continue the process of implementing its action plan.

Argentina

In June 2011, Argentina made a high-level political commitment to work with the FATF to address its strategic AML/CFT deficiencies. Argentina has taken steps towards improving its AML/CFT regime, including by enacting amendments to its AML legislation on 17 June. Based on the initial analysis of the recent legal amendments, the FATF expressed some specific concerns that there are still shortcomings in the criminalisation of money laundering and further clarification is required. The FATF has determined that strategic AML/CFT deficiencies remain. Argentina will work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures for the confiscation of funds related to money laundering and identifying and freezing terrorist assets (Recommendation 3 and Special Recommendation III); (3) enhancing financial transparency (Recommendation 4); (4) ensuring a fully operational and effectively functioning Financial Intelligence Unit and improving suspicious transaction reporting requirements (Recommendation 13, Special Recommendation IV, and Recommendation 26); (5) implementing an adequate AML/CFT supervisory programme for all financial sectors (Recommendations 17, 23 and 29); (6) improving and broadening CDD measures (Recommendation 5); and (7) establishing appropriate channels for international cooperation and ensuring effective implementation (Recommendation 36, Recommendation 40 and Special Recommendation V). The FATF encourages Argentina to address its remaining deficiencies without delay and continue the process of implementing its action plan.

Bangladesh

In October 2010, Bangladesh made a high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. Bangladesh should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) implementing adequate procedures for the confiscation of funds related to money laundering (Recommendation 3); (4) ensuring a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); (5) improving suspicious transaction reporting requirements (Recommendation 13 and Special Recommendation IV); and (6) improving international cooperation (Recommendations 36 and 39 and Special Recommendation V). The FATF encourages Bangladesh to address its remaining deficiencies and continue the process of implementing its action plan.

Brunei Darussalam

In June 2011, Brunei Darussalam made a high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies. Brunei Darussalam has taken steps towards improving its AML/CFT regime. However, the FATF has determined that strategic AML/CFT deficiencies remain. Brunei Darussalam will work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) establishing and implementing adequate procedures for the confiscation of funds related to money laundering (Recommendation 3); (4) improving suspicious transaction reporting requirements (Recommendation 13 and Special Recommendation IV); (5) ensuring a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); and (6) enacting and implementing appropriate mutual legal assistance legislation (Recommendation 36 and Special Recommendation V). The FATF encourages Brunei Darussalam to address its remaining deficiencies and continue the process of implementing its action plan.

Cambodia

In June 2011, Cambodia made a high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies. Cambodia has taken steps towards improving its AML/CFT regime. However, the FATF has determined that strategic AML/CFT deficiencies remain. Cambodia will work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) establishing and implementing adequate procedures for the confiscation of funds related to money laundering (Recommendation 3); (4) ensuring a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); and (5) establishing and implementing effective controls for cross-border cash transactions (Special Recommendation IX). The FATF encourages Cambodia to address its remaining deficiencies and continue the process of implementing its action plan.

Ecuador

In June 2010, Ecuador made a high-level political commitment to work with the FATF and GAFISUD to address its strategic AML/CFT deficiencies. The FATF has determined that certain strategic AML/CFT deficiencies remain. Ecuador should continue to work on implementing its action plan to address these deficiencies, including by: (1) ensuring adequate criminalisation of terrorist financing (Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) implementing adequate procedures for the confiscation of funds related to money laundering (Recommendation 3); and (4) reinforcing and improving coordination of financial sector supervision (Recommendation 23). The FATF encourages Ecuador to address its remaining deficiencies and continue the process of implementing its action plan.

Ghana

In October 2010, Ghana made a high-level political commitment to work with the FATF and GIABA to address its strategic AML/CFT deficiencies. However, the FATF has determined that strategic AML/CFT deficiencies remain. Ghana should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate measures for the confiscation of funds related to money laundering (Recommendation 3); (3) establishing effective CDD measures (Recommendation 5); (4) establishing a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); and (5) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III). The FATF encourages Ghana to address its remaining deficiencies and continue the process of implementing its action plan.

Honduras

In October 2010, Honduras made a high-level political commitment to work with the FATF and CFATF to address its strategic AML/CFT deficiencies. The FATF has determined that strategic AML/CFT deficiencies remain. Honduras should continue to work on implementing its action plan to address these deficiencies, including by: (1) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (2) ensuring a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); and (3) improving and broadening CDD measures (Recommendation 5). The FATF encourages Honduras to address its remaining deficiencies and continue the process of implementing its action plan.

Indonesia

In February 2010, Indonesia made a high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies. Since February, Indonesia has taken steps towards improving its AML/CFT regime, including by issuing circulars to financial institutions in accordance with its AML law. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. Indonesia should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising terrorist financing (Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); and (3) amending and implementing laws or other instruments to fully implement the 1999 International Convention for the Suppression of Financing of Terrorism (Special Recommendation I). The FATF encourages Indonesia to address its remaining deficiencies and continue the process of implementing its action plan.

Mongolia

In June 2011, Mongolia made a high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies. Mongolia has taken steps towards improving its AML/CFT regime. However, the FATF has determined that strategic AML/CFT deficiencies remain. Mongolia will work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) establishing adequate procedures for the confiscation of funds related to money laundering (Recommendation 3); (4) establishing suspicious transaction reporting requirements (Recommendation 13 and Special Recommendation IV); (5) establishing a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); (6) demonstrating effective regulation of money service providers. The FATF encourages Mongolia to address its remaining deficiencies and continue the process of implementing its action plan.

Morocco

In February 2010, Morocco made a high-level political commitment to work with the FATF and MENAFATF to address its strategic AML/CFT deficiencies. Since February, Morocco has demonstrated progress in improving its AML/CFT regime, including by adopting amendments to extend the scope of the money laundering and terrorist financing offences; to broaden customer due diligence requirements and taking steps to operationalise the FIU. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. Morocco should continue to work on implementing its action plan to address these deficiencies, including by adequately criminalising terrorist financing (Special Recommendation II).

Namibia

In June 2011, Namibia made a high-level political commitment to work with the FATF and ESAAMLG to address its strategic AML/CFT deficiencies. Namibia has taken steps towards improving its AML/CFT regime. However, the FATF has determined that strategic AML/CFT deficiencies remain. Namibia will work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising terrorist financing (Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) implementing an adequate AML/CFT supervisory programme with sufficient powers (Recommendation 23 and 29); (4) ensuring a fully operational and effectively functioning Financial Intelligence Unit, in particular addressing the operational autonomy of the FIU (Recommendation 26); (5) implementing effective, proportionate and dissuasive sanctions in order to deal with non-compliance with the national AML/CFT requirements (Recommendation 17); and (6) implementing the 1999 International Convention for the Suppression of Financing of Terrorism (Special Recommendation I). The FATF encourages Namibia to address its remaining deficiencies and continue the process of implementing its action plan.

Nepal

In February 2010, Nepal made a high-level political commitment to work with the FATF to address its strategic AML/CFT deficiencies. Since then, Nepal has taken steps towards improving its AML/CFT regime, including by passing legislation aimed at addressing deficiencies with regard to criminalisation of money laundering and terrorist financing, and confiscation and provisional measures and by ratifying the TF and Palermo Conventions. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. Nepal should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) implementing adequate procedures for the confiscation of funds related to money laundering (Recommendation 3); and (4) enacting and implementing appropriate mutual legal assistance legislation (Recommendation 36). The FATF encourages Nepal to address its remaining deficiencies and continue the process of implementing its action plan.

Nicaragua

In June 2011, Nicaragua made a high-level political commitment to work with the FATF and CFATF to address its strategic AML/CFT deficiencies. Nicaragua has taken steps towards improving its AML/CFT regime. However, the FATF has determined that strategic AML/CFT deficiencies remain. Nicaragua will work on implementing its action plan to address these deficiencies, including by: (1) establishing effective CDD measures and record-keeping requirements, in particular entities not currently regulated by the supervisory authority (Recommendation 5 and Recommendation 10); (2) establishing adequate STR reporting obligations for ML and FT (Recommendation 13 and Special Recommendation IV); (3) implementing an adequate AML/CFT supervisory programme for all financial sectors (Recommendation 23); (4) establishing a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); and (5) establishing adequate procedures for identifying and freezing terrorist assets (Special Recommendation III); The FATF encourages Nicaragua to address its remaining deficiencies and continue the process of implementing its action plan.

Nigeria

In February 2010, Nigeria made a high-level political commitment to work with the FATF and GIABA to address its strategic AML/CFT deficiencies. Since then, Nigeria has taken steps towards improving its AML/CFT regime, including by enacting legislation to criminalise TF and ML. The FATF has not yet assessed this law due to its very recent nature. The FATF will assess this legislation, and, in any case, Nigeria should work on addressing its deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) ensuring that relevant laws or regulations address deficiencies in customer due diligence requirements and that they apply to all financial institutions (Recommendation 5); and (4) demonstrating that AML/CFT supervision is undertaken effectively across the financial sector (Recommendation 23). The FATF encourages Nigeria to address its remaining deficiencies and continue the process of implementing its action plan.

Pakistan

In June 2010, Pakistan made a high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies. The FATF has determined that certain strategic AML/CFT deficiencies remain. The FATF is particularly concerned with the lack of implementation regarding Pakistan’s terrorist financing offence and calls upon Pakistan to demonstrate specific action. Pakistan should continue to work on implementing its action plan to address these deficiencies, including by (1) demonstrating adequate criminalisation of money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) demonstrating adequate procedures to identify, freeze and confiscate terrorist assets (Special Recommendation III); (3) ensuring a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); (4) demonstrating effective regulation of money service providers, including an appropriate sanctions regime, and increasing the range of ML/FT preventive measures for these services (Special Recommendation VI); and (5) improving and implementing effective controls for cross-border cash transactions (Special Recommendation IX). The FATF encourages Pakistan to address its remaining deficiencies and continue the process of implementing its action plan.

Paraguay

In February 2010, Paraguay made a high-level political commitment to work with the FATF and GAFISUD to address its strategic AML/CFT deficiencies. Since February, Paraguay has taken steps towards improving its AML/CFT regime, including issuing regulations prohibiting anonymous accounts. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. Paraguay should continue to work on implementing its action plan to address these deficiencies, including by: (1) establishing and implementing adequate procedures to identify, freeze and confiscate terrorist assets (Special Recommendation III). The FATF encourages Paraguay to address this remaining deficiency and continue the process of implementing its action plan.

Philippines

In October 2010, the Philippines made a high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies. Since February, Philippines has taken steps towards improving its AML/CFT regime, including by conducting outreach with regard to the AML regulations. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. The Philippines should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) implementing adequate procedures to identify and freeze terrorist assets and confiscate funds related to money laundering (Special Recommendation III and Recommendation 3); (3) enhancing financial transparency (Recommendation 4); (4) extending coverage of reporting entities (Recommendations 12 and 16). The FATF encourages the Philippines to address its remaining deficiencies and continue the process of implementing its action plan.

Sudan

In February 2010, Sudan made a high-level political commitment to work with the FATF and MENAFATF to address its strategic AML/CFT deficiencies. The FATF has determined that certain strategic AML/CFT deficiencies remain. Sudan should continue to work on implementing its action plan to address these deficiencies, including by: (1) implementing adequate procedures for identifying and freezing terrorist assets (Special Recommendation III); (2) ensuring a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); (3) ensuring financial institutions are aware of and comply with their obligations to file suspicious transaction reports in relation to ML and FT (Recommendation 13 and Special Recommendation IV); and (4) implementing a supervisory programme for the regulators to ensure compliance with the provisions of the new law and regulations (Recommendation 23). The FATF encourages Sudan to address its remaining deficiencies and continue the process of implementing its action plan.

Tajikistan

In June 2011, Tajikistan made a high-level political commitment to work with the FATF and EAG to address its strategic AML/CFT deficiencies. Tajikistan has taken steps towards improving its AML/CFT regime. However, the FATF has determined that strategic AML/CFT deficiencies remain. Tajikistan will work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures for the confiscation of funds related to money laundering and identifying and freezing terrorist assets (Recommendation 3 and Special Recommendation III); (3) enhancing financial transparency (Recommendation 4); (4) ensuring afully operational, and effectively functioning Financial Intelligence Unit and improving suspicious transaction reporting requirements (Recommendation 13, Special Recommendation IV, and Recommendation 26); and (5) improving and broadening CDD measures (Recommendation 5). The FATF encourages Tajikistan to address its remaining deficiencies and continue the process of implementing its action plan.

Tanzania

In October 2010, Tanzania made a high-level political commitment to work with the FATF and ESAAMLG to address its strategic AML/CFT deficiencies. The FATF has determined that certain strategic AML/CFT deficiencies remain. Tanzania should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets as well as implementing the UNSCR 1267 and 1373 through law, regulations or other enforceable means (Special Recommendation III); (3) establishing effective CDD measures (Recommendation 5); (4) establishing adequate record-keeping requirements (Recommendation 10); (5) establishing a fully operational and effectively functioning national Financial Intelligence Unit (Recommendation 26); and (6) designating competent authorities to ensure compliance with AML/CFT requirements (Recommendation 23). The FATF encourages Tanzania to address its remaining deficiencies and continue the process of implementing its action plan.

Thailand

In February 2010, Thailand made a high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies. Since February, Thailand has taken steps towards improving its AML/CFT regime, including by issuing ministerial regulations on cash threshold transactions. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. Thailand should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising terrorist financing (Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); and (3) further strengthening AML/CFT supervision (Recommendation 23). The FATF encourages Thailand to address its remaining deficiencies and continue the process of implementing its action plan.

Turkmenistan

In June 2010, Turkmenistan made a high-level political commitment to work with the FATF and EAG to address its strategic AML/CFT deficiencies. Since February, Turkmenistan has taken steps towards improving its AML/CFT regime, including by adequately criminalising money laundering and terrorist financing. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. Turkmenistan should continue to work on implementing its action plan to address these deficiencies, including by: (1) implementing adequate procedures to identify and freeze terrorist assets without delay (Special Recommendation III); (2) ensuring a fully operational and effectively functioning FIU (Recommendation 26); (3) developing collaboration between the FIU and domestic counterparts, including supervisory authorities; and (4) strengthening international cooperation. The FATF encourages Turkmenistan to address its remaining deficiencies and continue the process of implementing its action plan.

Trinidad and Tobago

In February 2010, Trinidad and Tobago made a high-level political commitment to work with the FATF and CFATF to address its strategic AML/CFT deficiencies. Since February, Trinidad and Tobago has taken steps towards improving its AML/CFT regime, including by enacting FIU regulations and amendments to the Anti-Terrorism Act regarding freezing of terrorist assets. The FATF has not yet assessed this law due to its recent nature. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. Trinidad and Tobago should continue to work on implementing its action plan to address these deficiencies, including by (1) implementing adequate procedures to identify and freeze terrorist assets without delay (Special Recommendation III); (2) implementing adequate procedures for the confiscation of funds related to money laundering (Recommendation 3); and (3) establishing a fully operational and effectively functioning FIU, including supervisory powers (Recommendation 26). The FATF encourages Trinidad and Tobago to address its remaining deficiencies and continue the process of implementing its action plan.

Ukraine

In February 2010, Ukraine made a high-level political commitment to work with the FATF and MONEYVAL to address its strategic AML/CFT deficiencies. Since that time, Ukraine has demonstrated progress in improving its AML/CFT regime, including by adopting legislation that aims to address issues relating to criminalisation of money laundering and terrorist financing and freezing of terrorist assets under UNSCR 1373. The FATF will conduct an on-site visit to confirm that the process of implementing the required reforms and actions is underway to address deficiencies previously identified by the FATF.

Venezuela

In October 2010, Venezuela made a high-level political commitment to work with the FATF and CFATF to address its strategic AML/CFT deficiencies. The FATF has determined that certain strategic deficiencies remain. Venezuela should continue to work with the FATF and CFATF on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising terrorist financing (Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendations I and III); (3) ensuring a fully operational and effectively functioning Financial Intelligence Unit, in particular addressing the operational autonomy of the FIU (Recommendation 26); (4) implementing adequate CDD guidelines for all sectors (Recommendation 5); and (5) establishing adequate STR reporting obligations for ML and FT (Recommendation 13 and Special Recommendation IV). The FATF encourages Venezuela to address its remaining deficiencies and continue the process of implementing its action plan.

Vietnam

In October 2010, Vietnam made a high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies. The FATF has determined that certain strategic AML/CFT deficiencies remain. Vietnam should continue to work with the FATF and APG on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) making legal persons subject to criminal liability in line with FATF Recommendation 2 or demonstrating that there is a constitutional prohibition to prevent this (4) improving the overall supervisory framework (Recommendation 23); (5) improving and broadening customer due diligence measures and reporting requirements (Recommendation 5, 13, and Special Recommendation IV); and (6) strengthening international cooperation (Recommendations 36, 40). The FATF encourages Vietnam to address its remaining deficiencies and continue the process of implementing its action plan.

Yemen

In February 2010, Yemen made a high-level political commitment to work with the FATF and MENAFATF to address its strategic AML/CFT deficiencies. The FATF has determined that certain strategic deficiencies remain. Yemen should continue to work on implementing its action plan to address these deficiencies, including by: (1) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (2) issuing substantive guidance/instructions to reporting institutions with respect to their ML/FT obligations (Recommendation 25); (3) developing the monitoring and supervisory capacity of the financial sector supervisory authorities and the FIU, to ensure compliance by financial institutions with their STR obligations, especially in relation to FT (Recommendation 23); and (4) ensuring a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26). The FATF encourages Yemen to address its remaining deficiencies and continue the process of implementing its action plan.

Zimbabwe

In June 2011, Zimbabwe made a high-level political commitment to work with the FATF and ESAAMLG to address its strategic AML/CFT deficiencies. Zimbabwe has taken steps towards improving its AML/CFT regime. However, the FATF has determined that strategic AML/CFT deficiencies remain. Zimbabwe will work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation I and Special Recommendation II); (2) establishing and implementing adequate procedures to identify and freeze terrorist assets (Special Recommendation III); (3) ensuring a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); (4) ensuring financial institutions are aware of and comply with their obligations to file suspicious transaction reports in relation to ML and FT (Recommendation 13 and Special Recommendation IV); (5) enacting and implementing appropriate mutual legal assistance legislation (Special Recommendation V); and (6) implementing the 1999 International Convention for the Suppression of Financing of Terrorism (Special Recommendation I). The FATF encourages Zimbabwe to address its remaining deficiencies and continue the process of implementing its action plan.

Greece

The FATF welcomes Greece’s significant progress in improving its AML/CFT regime and notes that Greece has met its commitments in its Action Plan regarding the strategic AML/CFT deficiencies that the FATF had identified in February 2010. Greece is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. Greece will work with the FATF in further strengthening its AML/CFT regime.

Jurisdiction not making sufficient progress

The FATF is not yet satisfied that the following jurisdiction has made sufficient progress on its action plan agreed upon with the FATF. The most significant action plan items and/or the majority of the action plan items have not been addressed. If this jurisdiction does not take sufficient action to implement significant components of its action plan by October 2011, then the FATF will identify this jurisdiction as being out of compliance with its agreed action plans and will take the additional step of calling upon its members to consider the risks arising from the deficiencies associated with the jurisdiction.

São Tomé and Príncipe

Despite São Tomé and Príncipe’s high-level political commitment to work with the FATF to address its strategic AML/CFT deficiencies, the FATF is not yet satisfied that São Tomé and Príncipe has made sufficient progress in implementing its action plan, and certain strategic deficiencies remain. São Tomé and Príncipe should work on addressing these deficiencies, including by: (1) adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II); (2) establishing a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26); (3) ensuring that financial institutions and DNFBPs are subject to adequate AML/CFT regulation and supervision, and that a competent authority or competent authorities have been designated to ensure compliance with AML/CFT requirements (Recommendations 23, 24 and 29); (4) implementing effective, proportionate and dissuasive sanctions in order to deal with natural or legal persons that do not comply with the national AML/CFT requirements (Recommendation 17); and (5) taking the necessary action to gain membership of GIABA. The FATF encourages São Tomé and Príncipe to address its remaining deficiencies and continue the process of implementing its action plan.

Source: FATF

Outcomes of the Joint Plenary meeting of the FATF and GAFISUD, Mexico City, 22-24 June 2011

Under the Mexican Presidency, the first joint FATF-GAFISUD Plenary meeting was held in Mexico City on 22-24 June 2011. The meeting was co-chaired by the FATF and GAFISUD Presidents.

FATF Decisions

The FATF took important new steps to protect the international financial system from abuse by:

• Producing two public documents as part of its ongoing work to identify jurisdictions that may pose a risk to the international financial system:
• FATF Public Statement on jurisdictions with strategic anti-money laundering and combating the financing of terrorism (AML/CFT) deficiencies.
• Improving Global AML/CFT Compliance: on-going process - Jurisdictions with strategic AML/CFT deficiencies for which they have developed an action plan with the FATF

• Issuing a statement on the progress made by Argentina in addressing deficiencies identified in its mutual evaluation of October 2010.

• Adopting the mutual evaluation reports of the State of Kuwait and the Sultanate of Oman.

• Publishing a detailed examination of Organised Maritime Piracy and Related Kidnapping for Ransom, Trafficking in Human Beings and Smuggling of Migrants and Money Laundering and Corruption.

• Publishing Guidance on Financial Inclusion.

• Continuing its work on revision of the FATF Recommendations and preparation for the fourth round of mutual evaluations.

AML/CFT improvements in Greece

The FATF welcomes Greece’s significant progress in improving its AML/CFT regime and notes that Greece has met its commitments in its Action Plan regarding the strategic AML/CFT deficiencies that the FATF had identified in February 2010. Greece is therefore no longer subject to monitoring under the FATF’s ongoing global AML/CFT compliance process. Greece will continue to work with the FATF to further strengthen its AML/CFT regime.

Statement on the progress made by Argentina

The FATF heard Argentina´s report on progress made since its first follow-up report presented in February 2011 and recognised the important legislative efforts aimed at improving the criminalisation of money laundering. Based on the initial analysis of the recent legal amendments, the FATF expressed some specific concerns that there are still shortcomings in the criminalisation of money laundering, and further clarification is required. Substantial progress to improve the criminalisation of terrorist financing has not yet taken place, and there are a large number of other AML/CFT deficiencies remaining. The FATF remains seriously concerned about the risks that such deficiencies may pose, as identified in “Improving Global AML/CFT Compliance: on-going process”, and will continue to review progress, in the context of measures that the FATF has agreed to follow under its enhanced follow-up procedures for members insufficiently in compliance with the FATF Recommendations.

The FATF expects more substantial progress by Argentina by October 2011. In particular, the FATF expects Argentina to fully address the FATF´s concerns regarding the criminalisation of money laundering in accordance with international standards, present to the FATF a draft law criminalising terrorist financing in accordance with international standards, and inform about the progress in addressing the other AML/CFT deficiencies. As part of this discussion, the FATF reaffirmed the responsibility of all members to observe a high level of compliance with the FATF Recommendations in an expedited manner.

Mutual Evaluation of the State of Kuwait and the Sultanate of Oman

The FATF discussed and adopted two mutual evaluation reports assessing the compliance of two Gulf Cooperation Council members, the State of Kuwait and the Sultanate of Oman against the international standards for combating money laundering and terrorist financing – the 40+9 Recommendations.

Summaries of these mutual evaluations will soon be available on the FATF website, and the full reports will be released in the coming weeks.

There is currently no evidence of significant money laundering and no major terrorist activity has been recorded in the State of Kuwait. However, Kuwait’s financial sector is growing rapidly and thus may create a potential environment for such activities. The assessment team for this evaluation, composed of staff of the International Monetary Fund (IMF), concluded that the Kuwaiti AML/CFT framework had some deficiencies: terrorist financing is currently not criminalised, the money laundering offence does not cover all serious predicate offences, the Kuwaiti financial intelligence unit (KFIU) has not been established as an independent agency carrying out all core functions set out by the FATF standards, and there are shortcomings in the AML/CFT supervisory framework for some financial institutions and designated non-financial businesses and professions (DNFBPs).

The evaluation of the AML/CFT regime of the Sultanate of Oman was conducted jointly by the FATF and the Middle East and North Africa Financial Action Task Force (MENAFATF). The level of compliance with the FATF Recommendations for the AML/CFT regime of Oman is comparatively high for the region, and the legal framework is generally sound. However, the Omani AML/CFT Law was only recently updated, and executive regulations must still be issued. In addition, the overall effectiveness is generally lacking, parts of the terrorist financing legal framework need to be improved and the number of money laundering cases needs to be significantly raised.

With the adoption of the mutual evaluation reports of the State of Kuwait and the Sultanate of Oman, the FATF concluded its third round of mutual evaluations that started in 2005 and comprised 35 FATF jurisdictions and five members of the Gulf Cooperation Council.

Organised Maritime Piracy and Related Kidnapping for Ransom

In recent years, there has been a growing concern over organised piracy on the high seas and kidnapping for ransom. These activities present a number of a potential risks to the international financial system and challenges to the law enforcement and regulatory framework worldwide. The FATF has completed a study that provides an overview of this problem and analyses the related money flows to the extent that this is possible. In addition to informing the work of other international bodies dealing with this issue, the report, which will be published shortly, will also serve as a useful source of general information on the subject.

Human Being Trafficking and Smuggling of Migrants

Criminals are increasingly turning to the trafficking of human beings and the smuggling of migrants given the high profitability of these illegal activities. The money generated by such activities finds its way into the financial system. The FATF has carried out a study which describes the money flows related to these two distinct problems and attempts to assess their scale. The report, which will be published shortly, provides a series of red-flag indicators for the various destination / origin countries and different sectors to help financial institutions to better detect related suspicious financial activity.

Money Laundering and Corruption

Corruption continues to be a significant public policy issue throughout the world, and for that reason work related to anti-corruption was identified as an objective under the Mexican Presidency. In the larger framework of its work on corruption, the FATF has prepared a study on the links between corruption and money laundering. The report, which will be published shortly, identifies key vulnerabilities within the current AML/CFT framework and discusses some of the obstacles to the recovery of corruption. In addition to providing the basis for further examination of related issues, the report will serve as the catalyst for future FATF work in developing guidance or best practices on AML/CFT measures relevant to combating corruption. The FATF will continue to work on issues related to the use of AML/CFT tools in the fight against corruption.

Guidance on Financial Inclusion

Financial inclusion is an important policy objective for many countries, and the implementation of AML/CFT measures should not become an impediment to financial inclusion. However, an overly cautious approach to AML/CFT safeguards could have the unintended consequence of excluding legitimate business and consumers from the financial system. In collaboration with the World Bank and the Asia Pacific Group on Money Laundering (APG) and in consideration of the objectives set by the Mexican Presidency, the FATF has completed work on guidance that will help in developing AML/CFT measures that are in line with financial inclusion goals without compromising the overall purpose of combating crime. In providing this guidance, the FATF is contributing to the common objective of the G20 in this area as agreed at the Seoul Summit of November 2010. The FATF will continue to strive to ensure that the objectives of financial inclusion and AML/CFT are complementary. The report will be available on the FATF website shortly.

Revision of the FATF Recommendations and Preparation for the Fourth Round of Mutual Evaluations

The FATF continues its work to revise the FATF Recommendations to ensure that they will continue to provide a comprehensive set of means to combat money laundering and terrorist financing, and to build on the experience of the 3rd round of mutual evaluations. The FATF is committed to a constructive engagement with all stakeholders, and is issuing a second public consultation document (pdf, 438 Kb) on a range of issues where changes to the Standards are being considered. This covers important issues such as:

• Clarifying beneficial ownership requirements (Recommendations 5, 33 and 34)
• Ensuring no inconsistency between AML/CFT and data protection / privacy requirements
• Creating an obligation for group wide compliance programmes for financial groups
• Enhancing international cooperation (Recommendation 40)
• Promoting a risk based approach to supervision
• Strengthening measures in relation to politically exposed persons
• Enhancing the transparency of wire transfers
• Implementing targeted financial sanctions in the context of terrorist financing and proliferation financing
• Strengthening and clarifying the requirements for financial intelligence units and law enforcement authorities

The President of the FATF, Mr. Luis Urrutia, thanked the FATF members for their decisive support to achieve the objectives set at the outset of his tenure and wished the new President, Mr. Giancarlo del Bufalo of Italy, and the new Vice-President, M. Bjorn Skogstag AAMO of Norway, Godspeed.

Luis Urrutia Corral

FATF President

Commission acts to enforce AML rules in Germany

The European Commission has today asked Germany to fully comply with EU laws regarding anti money-laundering (AML) and combating the financing of terrorism (CFT). The Commission is concerned that two German Bundesländer have not yet assigned competent supervisory authorities to all entities which are subject to AML/CFT requirements, and Germany has thus failed to prevent the misuse of the financial system for the purpose of money laundering and terrorist financing. The Commission’s request to Germany takes the form of a reasoned opinion. If Germany does not reply satisfactorily within two months, the Commission may refer the matter to the EU Court of Justice.

What is the aim of the EU rule in question?

The anti-money laundering (AML) legislation (Directive 2005/60/EC) aims to protect the integrity, reputation and stability of the financial system, all of which are integral to the proper functioning of the Internal Market. Each Member State in the EU was required to adopt this legislation by 15 December 2007. The legislation requires the financial sector and other designated bodies and professions, including lawyers, real estate agents, and casinos, to comply with a number of obligations. These could include taking measures to identify their customers and reporting suspicious transactions. To ensure these obligations are adhered to, Member States are required to appoint competent authorities to supervise the way these entities fulfil their tasks.

How is Germany not respecting these rules?

According to German Anti-money laundering law1 the federal states or Bundesländer in Germany are responsible for assigning supervisory authorities to certain designated entities. However, not all German Bundesländer have appointed such supervisory authorities. There are deficiencies with regard to real estate agents, insurance intermediaries and providers of goods, when payments are made in cash in excess of €15 000. Deficiencies have been found in the following Bundesländer: Mecklenburg-Vorpommern and Sachsen-Anhalt.

How are EU citizens and/or businesses suffering as a result?

Money laundering is a major international problem. Whether the perpetrators are corrupt dictators, drug barons, human traffickers, fraudsters or racketeers, they all have one thing in common: the need to disguise the flow and deposit of money so that it appears legitimate. The movement of large sums of illegal money threatens both the stability and reputation of the financial system, thereby jeopardising the proper functioning of the Single Market.

Failure to adequately implement the requirements of AML and CFT legislation means that criminals and terrorist organisations can detect and exploit loopholes in the system more easily. The supervision of designated entities is thus an important element towards ensuring a sound and comprehensive AML/CFT system.

More information

http://ec.europa.eu/internal_market/company/financial-crime/index_en.htm

Latest information on infringement proceedings concerning all Member States:

http://ec.europa.eu/community_law/index_en.htm

For more information on infringement procedures, see MEMO/11/45

Source: IEWY

Terror Cell Uncovered in Canada

Three people have been arrested in Canada as part of an alleged hometown plot.

Hiva Mohammad Alizadeh, 30, and Misbahuddin Ahmed, 26, residents of Canadian capital Ottawa were arrested on Wednesday and made a brief court appearance on Thursday. Police have said that they expect more arrests.

The Toronto Star reported on a third arrest in the case, this time of a man who appeared on “Canadian Idol”, Canada’s version of the popular television program “American Idol”, in 2008.

Khuram Sher, 28, was arrested in London, Ontario, in connection to the terror plot. Sher is a 2005 graduate of the McGill medical school in Montreal. In 2006, he visited Pakistan during relief efforts after an earthquake in Kashmir. He auditioned unsuccessfully for “Canadian Idol” in 2008, where he told judges he was originally from Pakistan and came to Canada in 2005.

The suspects are charged in connection with a plot to make and detonate improvised explosive devices as well as financing terror groups operating in Afghanistan.

Canadian police said on Thursday that the terrorist cell was based in Ottawa and had international connections. The cell was only reportedly months away from exploding bombs on Canadian soil, said a senior police official.

Police allege that the three men have been conspiring since February 2008 with three others in a terrorist plot traced back to Iran, Pakistan and Dubai.

Chief Superintendent Serge Therriault, the Royal Canadian Mounted Police chief of criminal operations said police seized more than 50 electronic circuit boards that could be used to produce improvised explosive devices, similar to lethal bombs that have been involved in the majority of deaths and injuries of Canadian soldiers in Afghanistan.

“This group posed a real and serious threat to the citizens of the national capital region and Canada’s national security,” Therriault said.

Alizadeh faces charges of making or possessing explosive devices for terrorist purposes and terrorist financing. According to police, he is an active member of an unnamed terrorist group.

“Part of the decision to make the arrests at this time was to prevent the suspect from providing financial support to terrorist counterparts for the purchase of weapons which would in turn be used against coalition forces and our troops (in Afghanistan),” said Therriault.

Alizadeh and Misbahuddin were remanded in custody until they make a video court appearance next Wednesday.

Sher’s relatives reacted in shock to his arrest. "He was always joking around. He was a contestant on Canadian Idol. He's such a great guy," said Mariam Wasty, Sher’s cousin, to Postmedia News. "I don't know why he'd be connected to this."

Khurram Sher's uncle, Rafat Syed said: "Oh my god, impossible. He's not that type of person. You must be joking.”

Canadian Prime Minister Stephen Harper said Thursday that terror networks have a global reach: “They exist not only in remote countries but through globalization and the Internet, they have links in our country and all through the world,” he said.

Source: IsraelNationalNews

AUSTRAC sniffs out new analytics system

Australian government financial intelligence unit AUSTRAC will pilot a real-time analysis technology in April, in hopes of providing greater intelligence to other agencies.

The trial, to encompass 35 of its online-capable agencies, will comprise implementation of new search and analysis tools for social networks, geospatial information with improved graphical analysis, data mining, monitoring and data matching capabilities.

The agency collects financial transaction reports from a range of business including financial, money services, gambling and bullion sectors. This includes reports such as large cash transactions, international funds transfer instructions and suspicious matter reports, in order to prevent money laundering and other criminal activities.

Most of these reports are received electronically.

Since the introduction of the Anti-Money Laundering and Counter-Terrorism Financing Act of 2006, it has been challenged by increased data volumes, report complexity, partner agency request and increasing partner agency expectations on turn-around times and quality, according to department documents.

A five-year strategic vision was adopted for the re-engineering of AUSTRAC’s intelligence operations, including the implementation of new ICT architecture to maintain pace with the changing environments. It received $24 million in additional funding from last year's Federal Budget for the technology.

“The new analytics solution will enhance the capability of AUSTRAC and its partner agencies," the documents read. "There are currently 35 agencies that have online access to AUSTRAC’s analytical systems and tools. The objective is to deliver higher value financial intelligence in near real-time and better meet the needs of our stakeholders and the broader intelligence community."

AUSTRAC also wants to introduce a case management and workflow system which will be used to house data on current cases.

Source: Computer World

World Bank demands tight rules on mobile cash

The World Bank has called for Central Bank regulation of telecommunication companies offering money transfer and mobile banking services — a move that could raise customer charges owing to increased compliance costs.

While recognising that mobile technology offers a chance for an estimated three billion low income earners to get access to financial services, the bank says that the line differentiating financial providers in the banking, telecom, credit card and mobile commerce has become increasingly blurred, yet no robust regulations to guard against money laundering have been passed.

“Distinctive risks concern observers in affected service markets,” said the World Bank. “These perceptions merit urgent attention because mobile financial service providers may fall outside anti-money laundering and combating the financing of terrorism controls generally adhered to by traditional financial institutions,” added the institution in a presentation made at a Citi Bank organised mobile money policy forum in Nairobi last month.

The bank says regulators and players in the industry need to identify perceived risks to avoid formulating laws that will put the sector into the trap of over-regulation.

“Non-bank providers of financial services, such as telcos should be considered as ‘Financial Institutions,’ as defined by the Financial Action Task Force (FATF).”

FATF is an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorism financing.

The Central Bank of Kenya (CBK) did not respond to our request for comment.

Speaking on Monday during the launch of a new internet based mobile money transfer system, CBK governor Prof Njuguna Ndung’u said the regulator “will continue to work with the ministry of finance and the financial sector regulators to promote a sound, safe, efficient and inclusive financial system with no room for regulatory arbitrage.”

Kenya is seen as a pioneer in the mobile phone money transfer services since its launch of M-Pesa in 2007.

All the four mobile phone service firms currently offer money transfer services, moving an average of Sh76 billion every month, and creating jobs for an estimated 39,449 agents as per CBK’s data.

“This reflects the fact that when cost of transactions decline, transactions increase in volume,” said Prof Ndung’u.

Under the World Bank proposal, mobile service providers would be put under two regulators, CBK and their present regulator, the Communications Commission of Kenya (CCK).

Although mobile service providers that offer money transfer service are currently subject to some level of regulation by the CBK, giving them financial institution status would increase their reporting compliance requirements.

“It is not necessary (considering mobile phone operators as financial institutions) because it is not our core business. We’re not a bank,” said Angela Ng’ang’a-Mumo, head of corporate communications at Telkom Kenya.

Ms Mumo said Telkom’s Orange money, which is run in partnership with Equity Bank, is already regulated by the CBK since it uses a banking platform.

Yu country manager Atul Chaturvedi said that while regulations differ from country to country, what is most important is the need to safeguard customers’ money and make sure that the transfer services are not abused.

If the proposal was to incur more costs, it would be a price that would be borne by consumers, he added

“We’ve not seen any misuse in Yu Cash and we do not think that there is great misuse in the sector,” said Mr Chaturvedi.

Owino Magana, a regional IT consultant said the regulations should be done harmoniously by both regulators and stakeholders who should also borrow from experiences in other countries.

jgachiri@ke.nationmedia.com

Source: Business Daily

India faces money laundering, terrorist financing risk: IMF

India, which has witnessed numerous terror attacks and still remains a potential target for such strikes, faces significant money laundering and terrorist financing risk, the IMF has warned.

The International Monetary Fund in its report "India: Observance of Standards and Codes FATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism" however appreciate the steps taken by New Delhi to counter money laundering and terrorist financing.

The report dated July 2010 was released Monday. "As a leader among the emerging economies in Asia with a strongly growing economy and demography, India faces a range of money laundering and terrorist financing risks," it said.

"The main sources of money laundering in India result from a range of illegal activities committed within and outside the country, mainly drug trafficking; fraud; counterfeiting of Indian currency; transnational organised crime; human trafficking; and corruption," the report said.

"India continues to be a significant target for terrorist groups and has been the victim of numerous attacks. There are no published figures of terrorist cells operating in the country," it said.

Based on a threat assessment, India has identified the following major sources for terrorist financing (FT): funds/resources from organisations outside India, including foreign NPOs; counterfeiting of currency; and criminal activities including drug trafficking and extortion.

According to the report, since mid-2009, India has increased its focus on money laundering and the use of the money laundering (ML) provisions. However, there are still some important and in some instances, long-standing legal issues, such as the threshold condition for domestic predicate offences, that remain to be resolved.

Effectiveness concerns are primarily raised by the absence of any ML convictions, it said. Key recommendations made to India include the need to: address the technical shortcomings in the criminalisation of both money laundering and terrorist financing and in the domestic framework of confiscation and provisional measures; broaden the CDD obligations with clear and specific measures to enhance the current requirements regarding beneficial ownership.

It also recommended India to improve the reliability of identification documents, the use of pooled accounts, PEPs, and non-face-to-face business; ensure that India Post, which recently became subject to the PMLA, effectively implements the AML/CFT requirements; and enhance effectiveness of the STR reporting regime.

The report recommended India to enhance the effectiveness of the financial sector supervisory regime and ensure that India Post is adequately supervised. It also asked to ensure that the competent supervisory authorities make changes to their sanctioning regimes to allow for effective, proportionate and dissuasive sanctions for failures to comply with AML/CFT requirements; and extend the PMLA requirements to the full range of DNFBPs, and ensure that they are effectively regulated and supervised.

Source: Deccan Herald