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No country can claim to have a perfect national framework to address money laundering, terrorist or proliferation financing, the Financial Action Task Force’s (FATF) president has said in a new report on compliance.
FATF has published a fresh look at how member countries, currently totalling 39, are complying with the standard-setting body’s 40 recommendations to tackle financial crime.
This is the first public report of its kind, according to FATF.
It is based on data from FATF and FATF-style Regional Bodies (FSRB) mutual evaluation reports since 2013, which assessed the strengths and weaknesses of national frameworks to tackle these crimes.
FATF has also stated that it will begin evaluating countries’ financial crime prevention more frequently, shortening its incoming round of mutual evaluations, or peer review process, from a ten- to six-year cycle.
The report highlights that many countries still face substantial challenges in taking effective action in line with the risks they face.
This includes difficulties in investigating and prosecuting high-profile cross-border cases and preventing anonymous shell companies and trusts from being used for illicit purposes.
“Every weakness on our side is an opportunity on the side of criminals and terrorist financiers,” said Marcus Pleyer, FATF’s president, in a forward statement. “We are determined to reduce these common deficiencies and strengthen our global approach to money laundering, terrorist and proliferation financing.”
On technical compliance, countries have generally put in place the legal and regulatory framework required for preventive measures for financial institutions, according to the report.
For example, 100 percent of FATF countries and 99 percent of FSRB countries have implemented these laws.
However, FATF’s report also warned that countries are not focusing enough on results.
Financial institutions, as well as designated non-financial businesses and professions, still apply a tick-box approach to preventive measures, the report continues. “These entities need a change of culture to enact supervisory systems to conduct customer due diligence, keep records, and file suspicious transaction reports in order to apply a truly risk-based approach.”
The report also notes that around half (52 percent) of countries have the necessary laws and regulations in place to understand, assess the risks of and verify the beneficial owners or controllers of companies, whether they are legal persons or arrangements.
Just 9 percent of countries are meeting the effectiveness requirements of this immediate outcome.
In spite of the critiques, FATF has concluded that countries have made huge progress in improving technical compliance by establishing and enacting a broad range of laws and regulations to better tackle money laundering, terrorist and proliferation financing.
This has created a firm legislative basis for national authorities to, as FATF says, follow the money that is fuelling crime and terrorism.
In terms of laws and regulations, 76 percent of countries have now satisfactorily implemented the FATF’s 40 Recommendations.
This, the institution said, is a significant improvement in technical compliance, which stood at just 36 percent in 2012, demonstrating the positive impact of the FATF Mutual Evaluation and Follow-up processes.
“I believe that the FATF and its Global Network is making a positive difference to international efforts to combat money laundering, terrorist and proliferation financing,” summarised Pleyer.
“Together, we must continue to ensure that we effectively implement laws, regulations and policies to tackle the financial flows that fuel crime and terrorism. Ultimately, we must make the world a safer place for all citizens.”
