FATF TAKING CONVERGED APPROACH TO TACKLE OWNERSHIP, AML, GRAFT: PLENARY UPDATE

As the world’s top financial crime watchdog concludes its first plenary under its new director on Friday, the group is continuing its focus on how countries can create laws, systems and controls to capture beneficial ownership information, keep it current and share that data with other countries.

That continues the momentum generated earlier this month by the Paris-based Financial Action Task Force (FATF) after its revealing report on beneficial ownership. That report showed that while many countries around the world, particularly G20 countries and FATF members, have laws to capture beneficial ownership information, the laws are often poorly implemented, weakly enforced and woefully outdated. FATF sets the global anti-money laundering (AML) agenda.

In the October 7 report, FATF stated it would use its extensive influence and global leverage to pressure countries – both members and non-members – to ensure a wide array of sectors, such as company formation agents, attorneys and banks, capture this data and make it available to international authorities, and preferably the public as well. To read ACFCS coverage of the FATF report, please click here.


Here is a quick snapshot of the issues being discussed at the FATF plenary this week, which ends Friday:

  • The outcomes of the mutual evaluation reports of Switzerland and the United States. These reports assess each country’s measures to combat money laundering and terrorist financing, and make recommendations to further strengthen these measures. Subject to the discussions at this meeting, these reports are expected to be published within two months of the plenary meeting.
  • Global response to terrorist financing.  Delegates will discuss progress in implementing the consolidated strategy since the June 2016 Plenary meeting and guidance to assist countries in criminalizing terrorist financing. FATF is expected to approve a joint FATF-GABAC-GIABA report on Terrorist Financing in West and Central Africa.
  • De-risking – decline of correspondent banking relationships. The practice of de-risking, which could lead to financial exclusion and higher money laundering and terrorist financing risks, has been a concern for the FATF for some time. Delegates will discuss the complex drivers for de-risking and to ensure that an incorrect application of AML/CFT measures does not contribute to this practice. The Plenary is expected to approve guidance which explains the risk-based approach for correspondent banking.
  • Transparency and beneficial ownership.  Delegates will discuss FATF’s proposals to G20 to improve countries’ effective implementation of FATF standards to improve access to beneficial ownership information.

Giving an update this week, FATF stated it is taking a more concerted and converged approach to find practical, workable solutions. It is tapping for the sixth time the G20 Anti-Corruption Working Group, which brings together AML and terror finance analysts of its own and other groups to target graft, all in all a grouping of more than 100 delegates from 36 countries and 16 international organizations.

Some countries “have already put in place adequate legal frameworks to collect and maintain beneficial ownership information as part of their AML/CFT customer due diligence processes,” according to FATF.

“However, effective implementation of these measures presents significant shortcomings and remains a challenge. Work also still needs to be undertaken in most jurisdictions to ensure that such information is available for the purpose of investigating and prosecuting corruption offences.”

The groups dissected how countries can “ensure the accuracy, quality and timely access of beneficial ownership information collected at both domestic and international levels.”

They also laid out how to establish central registries, boosting the morale of attendees but reminding everyone how the information is currently being used to capture organized criminal groups, terrorists and corrupt political powerbrokers while not running afoul of privacy and data protection laws.

The meeting echoed some of the themes in the FATF report on beneficial ownership, concluding that the only way the effort can be successful is for G20 countries to “lead by example,” and then go another layer deeper by helping other smaller or less developed countries in the areas of capacity building and technical support.

Part and parcel of the effort has to deal with better communication, coordination and creativity by top tax and financial crime compliance bodies.

Discussions focused on beneficial ownership are currently being undertaken by different bodies at the international level – particularly by the FATF and the Global Forum on Transparency and the Exchange of Information for Tax Purposes, as well as the World Bank and the Organisation for Economic Co-operation and Development – with a “view to creating further synergies and improving implementation of the international standards on beneficial ownership.”