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

FATF to revise money laundering status for Argentina

The Financial Action Task Force (FATF) announces today the results of a review of Argentina’s mechanisms to control money laundering activities in the country. The announcement will take place during the last day of the organization’s Council summit at Mexico City. No alterations of the Argentinean status are expected. Although some revision is anticipated, no sanctions are expected.

Yesterday Justice Minister Julio Alak delegation sources said that the FATF has acknowledged Argentina’s effort to fight money laundering. During its plenary session, the organization recognized that Argentina had moved forward in its prevention and fight against money laundering activities.

Alak spoke before the assembly and expressed that the new law recently passed by Congress, which includes stricter measures for those involved in money laundering activities, “effectively complies with all the organization’s recommendations.”

The Financial Action Task Force is an inter-governmental body whose purpose is the development and promotion of policies, both at national and international levels, to combat money laundering and terrorist financing. The FATF develops global standards for combating money laundering and terrorist financing.

Source: Buenos Aires Herald

Argentina targets money laundering in football

Argentina's government announced tough new rules to combat money laundering in football on Wednesday, requiring detailed reports on transactions involving many more people than just players and staff.

Argentina's Financial Information Unit published its regulations in response to pressure from the global Financial Action Task Force, which provides anti-money-laundering guidelines to governments worldwide and began targeting football in 2009.

The rules require the Argentine Football Association and every club in the top two divisions to file reports not only on everyone on the payroll who makes at least 60,000 pesos ($13,800) a year, but everyone they do business with as well.

That includes not just league officials, players, owners and staff, but also corporate sponsors, media figures, investors in players and team property, agents and government officials.

And the income they must report includes not just salaries, but outside bonuses and prizes, loans and deals for image rights, as well as in-kind payments such as housing, cars, and financial deals involving family members.

Those who fail to comply could be fined up to 100,000 pesos ($23,000) or 10 times the amount of money involved, whichever is greater.

Many Argentine clubs are deeply in debt despite the vast sums of money that flow through the country's football industry.

Gerardo Molina, chief executive of Euroamericas Sports Marketing, told The Associated Press last year that a study by his company showed Argentina has been the world's top exporter of players, with 2,204 sold or transferred to clubs abroad in 2010, topping Brazil's 1,674. Selling the rights to these Argentine players to clubs in Europe and around the world generated about $500 million that year, he said.

The Argentine watchdog agency says football is being challenged by organized crime like never before, citing a 2009 study by the global task force that declared football particularly vulnerable to money laundering, tax evasion, political corruption and other crimes, including even trafficking in human beings.

The agency's chief, Jose Sbattella, described football as a pit of temptations in a preface to the new rules, which were announced in the official government bulletin.

''The international organizations in question maintain that the sport today faces new threats and challenges that come along with commercial activity, exploitation of young players, doping, corruption, racism, illegal betting, violence, money laundering and other activities,'' Sbattella wrote.

Money laundering tricks range from basic to complex and sophisticated, the agency warned, including cash, international transfers, fiscal paradises, shell companies, and the illegal use of non-banking professionals to move money. In particular, selling rights to a player or team's image for undeclared amounts was being increasingly used to evade taxes, it said.

''The amounts of money invested in football have grown mainly as a consequence of the increase in television rights and corporate sponsorships, and at the same time, the labor market for professional football players has seen unequaled globalization, so that an ever-larger number of players are contracted by foreign teams, and the money being transferred around the world has reached surprising levels,'' the agency added.

Argentina's government has toughened all sorts of reporting rules in recent months in hopes of staying off the Financial Action Task Force's ''gray list'' of nations where financial transactions carry a high risk of criminal activity. The label can increase the overall cost of doing business in a country.

The controls on Argentine football had been expected since December, when AFA agreed to more government supervision and tax compliance in exchange for receiving more tax dollars for television rights. As a result, AFA gets about 900 million pesos (more than $200 million) a year to televise games for free through its ''Football for All'' program.

The watchdog agency noted that its new rules came after numerous consultations with AFA, the clubs and the players' union.

Source: FOX News

Paraguay called financial hub for terror and crime

Ralph Nieves, a wiry ex-NYPD narcotics detective, lived through the aftermath of Sept. 11, 2001, in Manhattan. That is why what he discovered about a particular part of Paraguay during a recent assignment there has so disturbed him.

Working under a U.S. government contract to carry out polygraph examinations of public officials in the country, Nieves said he discovered evidence of pervasive corruption among some police and military units.

It is a situation other law enforcement officials believe has contributed to parts of Paraguay being a terrorist haven where al-Qaida, Hezbollah and allied groups have been for years.

As a result, Paraguay's borders with Brazil and Argentina -- an area called the "tri-border" -- are being increasingly viewed by investigators, as well as American diplomats, as the vulnerable underbelly of the U.S. Ciudad del Este, Paraguay's second largest city,which is suspected of being a financial hub for terror and organized crime groups.

Some American investigators also believe the area's porous borders make it an ideal springboard for terrorists to make their way to the U.S. circuitously through Mexico and the Caribbean by using a variety of smuggling venues.

"Every major criminal organization in the world has a criminal representation in Ciudad del Este," Nieves, 63, said in a recent interview.

The lawlessness of the region makes it a threat for future terrorist financing and action in New York, Nieves said. He isn't alone in his concerns.

"It is being watched," Rep. Peter King, the ranking Republican on the House's Homeland Security Committee, told Newsday recently when asked about the tri-border zone.

Hezbollah, an umbrella organization for Shia Muslims, which started in Lebanon, is believed to have laundered $10 million annually through the area, King said.

Martin Ficke, former head of Immigration and Customs Enforcement in New York and now director of operations for the Jericho-based investigative firm SES Resources Ltd., said the tri-border is a continuing concern for money laundering. Ficke, who worked with the El Dorado money laundering task force, said agents were looking to see how readily terrorists could rely on narcotics networks in Paraguay to move cash to support terror operations. He wouldn't comment further.

Officially, the U.S. Department of State says southern Paraguay has yet to sustain an "operational" presence for al-Qaida, Hezbollah and Hamas. King also doesn't believe al-Qaida is present in the area. But there are documented cases where members and sympathizers of Hamas, a militant Palestinian organization, and Hezbollah have engaged in money laundering, extortion, bombings and other crimes inside Ciudad del Este and surrounding areas. Back in the 1990s, suspects in the bombings of South America's Jewish communities were traced to the area.

Some U.S. officials also believe an al-Qaida ally, a shadowy terrorist group known as Lashkar-e-Taiba, which became active in Kashmir in the 1990s, is now operating in the region. Earlier this year, a Manhattan federal judge sentenced a Baltimore man to 15 years in prison for traveling to Pakistan for terrorism training at one of the group's camps.

A report prepared by the U.S. Embassy in Paraguay in April said the country doesn't have effective ways to deal with money laundering and terrorist financing but does try to cooperate in counterterrorism efforts. Judicial and police corruption were concerns, said the report.

In May, MSNBC ran a brief interview by correspondent Pablo Gato with a young Arab Muslim sympathizer of Hezbollah in Ciudad del Este who threatened to attack the U.S. if Iran was targeted.

"In two minutes, Bush is dead," the man told MSNBC of the threatened consequences of a U.S attack.

While those remarks seem like braggadocio, some U.S. officials have been wary of Hezbollah members infiltrating the United States through Mexico to carry out acts of terror. Washington has been pouring millions into Paraguay to try to strengthen its legal institutions, which is why Nieves, who is a private investigator in the Bronx, was working there.

Nieves took polygraph exams of nearly 80 cops, customs officials and military officers. They were applicants for positions in a special customs task force aimed at improving border controls in Paraguay that was to be funded by American aid dollars.

According to Nieves, one of a few U.S.-based Spanish-language polygraphers active in the business, the officials easily opened up to him. After Nieves assured them that admissions of participating in routine graft -- known locally as "la coima" -- wouldn't get them in trouble, the applicants said they believed criminals were tipped off to investigations by law enforcement officials. In some cases, local prosecutors warned smugglers of raids so they could dispose of contraband, Nieves said.

One customs officer said that some higher-ranked customs officials knew all of the organized crime leaders and provided them with information. Some national police also took part in executions on the border with Brazil near the town of Pedro Juan Caballero, said the official, adding that the killings involved disputes over smuggled goods.

The applicants painted a picture of a wild-west atmosphere where legitimate law enforcement was intimidated by criminals and corrupt higher officials.

"They mentioned terrorists, every organized crime group, al-Qaida, the Chinese," recalled Nieves of his debriefings.

One American law enforcement consultant who didn't want to be identified because he does a lot of business in Paraguay said the country's customs service is prone to corruption because of the low wages officials are paid. But even higher pay won't bring speedy reform, he said.

"They don't look at it as corruption. It is part of the culture," he said. "Everybody takes a piece of the government income."

"Most of those people who were coming forward were decent people. Unfortunately, the circumstances are overwhelming for them," Nieves said about the corruption.

Nieves thinks the United States could benefit by developing its own network of paid informants within Paraguay's customs and border police as an early warning system against terrorism.

"Everyone I met were people we could flip," he said.

http://www.newsday.com/news/nationworld/ny-nypara0101,0,7656260.story

Jersey lawyer criticises inconsistency of EU money laundering 'white list'

A Jersey lawyer specialising in the field of money laundering and financial services regulation has questioned the validity of the European Union's 'white list' of countries whose money-laundering controls are considered to be equal to those of EU member states, and which notably excludes leading offshore fund jurisdictions in Europe and the Caribbean.

Stephen Platt, an English barrister and chairman of BakerPlatt Group, queries the inclusion on the list of countries such as Russia, Argentina and Mexico, as well Australia and Canada, which have been adjudged to be less than 25 per cent compliant with the international standards established by the Financial Action Task Force.

Platt describes as "bewildering" the suggestion that the white list countries have higher standards of anti-money laundering controls than leading offshore financial services jurisdictions including the UK's Crown Dependencies.

"Having researched the background to some of the countries included, we question why countries that fall behind recognised international standards are on the list, while finance centres such as Jersey, the Bahamas and the Cayman Islands are not," says Platt, who advises governments and regulators on the implementation of regulatory and anti-money laundering rules.

An analysis by BakerPlatt and its alliance partner in London, Seven Bedford Row, notes that the first mutual evaluation report on Russia in 2001 by the European Committee on Crime Problems noted as a "critical deficiency" the country's lack of comprehensive laws and regulations implementing international standards on money laundering.

Although a second evaluation in 2004 noted significant improvements, it also found that numbers of investigations, prosecutions and convictions for money laundering were falling and know your customer procedures remained deficient.

A report on Argentina by Gafisud, a regional FATF offshoot for South America, noted inherent weaknesses in legislation that had the effect of impeding successful prosecution of money laundering, while no offence of terrorist financing existed. The country was criticised for its failure to provide statistics in anti-money laundering areas, preventing an assessment of the implementation of core requirements from being carried out.

The FATF's September 2004 report described the application of anti money laundering measures in Mexico as somewhat haphazard, and said the lack of mutual legal assistance legislation not only inhibited the country's ability to co-operate internationally, it also undermined national prosecutions. Bank and trust secrecy was also criticised as impeding investigations.

In addition, the lawyers say, while the FATF praised South Africa for developing a legislative structure to combat money laundering, the absence of a framework to combat the financing of terrorism was noted, whilst the framework in place was so new it needed time to be assessed for its effectiveness.

BakerPlatt notes that Jersey, which was not included on the white list, was assessed as 76 per cent compliant at the time of the island's last assessment by the International Monetary Fund in 2003. The most recent FATF assessments, issued in November last year, rated the Bahamas as 45 per cent compliant and Cayman as 78 per cent compliant.

However, five of the 13 countries on the list were far below this level, according to their most recent IMF assessments: Australia (24 per cent), Canada (14 per cent), Singapore (23 per cent), Switzerland (22 per cent) and the US (31 per cent).

"Australia's and Canada's staggering level of non-compliance with FATF recommendations makes it difficult for the EU to justify their inclusion on the white list on the grounds of 'equivalence'," Platt says.

"Given that the EU recently announced that it is to pursue infringement measures against 15 of its member states for failing to implement the Third Money Laundering Directive into national law, it would perhaps be better placed to give a jurisdiction such as Jersey the recognition it deserves, and the role model some of its member states appear to need, as the leader in the field of anti-money laundering."

Source: HedgeWeek