Relevant Organizations And Standard-Setting Bodies: Anti Money Laundering And Counter Terrorist Financing Regulation

We will get to know some of the most relevant organizations and standard-setting bodies in the field of AML and CTF regulation. 

This is important because these bodies and organizations significantly impact the global political agenda in preventing money laundering and terrorist financing.

Relevant Organizations And Standard-Setting Bodies In AML And CTF Regulation

Financial Action Task Force (FATF)

The first organization on that list is the FATF.  The Financial Action Task Force, the FATF, is undoubtedly the most relevant international standard-setting body on anti-money laundering and counter-terrorism financing.  The FATF was formed in 1989 by the G7 Summit in Paris to combat the growing problem of money laundering. 

At the time, the task force was charged with studying money laundering trends, monitoring activities taken at the national and international level, reporting on compliance, and issuing recommendations and standards to combat money laundering.  The objectives of FATF have barely changed.  The single most important objective is to set standards and promote effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system.

It’s important to mention that the FATF is an intergovernmental organization and a “policy-making body” that works to generate the necessary political will to bring about national legislative and regulatory reforms in the area of money laundering.

FATF Recommendations

The most relevant piece of work of the FATF is the so-called FATF Recommendations.  These recommendations have a history of their own.  1990 marks the year when the FATF first issued its initial 40 recommendations on money laundering.  It was, and it is, the primary means of policy issued by the FATF. 

The Recommendations are seen globally as the world standard in anti-money laundering.  Many countries have committed to putting the Forty Recommendations in place.  The Recommendations cover the criminal justice system and law enforcement, international cooperation, and the financial system and its regulation.  Speaking about the Recommendations’ history, the FATF completely revised the Forty Recommendations in 1996 and 2003.  A ninth Special Recommendation was added later.

In October 2001, following the September 11 terrorist attacks in the United States, the FATF had issued eight Special Recommendations on Terrorist Financing.  Later on, another Special Recommendation was added.  Together, the 40 Recommendations on Money Laundering and Nine Special Recommendations on Terrorism Financing set the international standard for anti-money laundering measures and combating the financing of terrorism and terrorist acts.  Both sets of FATF Recommendations are intended to be implemented at the national level through legislation and other legally binding measures

At some point, the FATF has issued Interpretive Notes for their Recommendations. Ultimately, in 2012, the FATF codified its recommendations and Interpretive Notes into one document.  At the time of shooting this course, the most recent version of this document was June 2019.  

Mutual Evaluations

The FATF also monitors progress in implementing its Recommendations through peer reviews of member countries.  This is what the FATF calls mutual evaluations.  FATF evaluates a country’s performance based on its assessment methodology that covers two elements.  The first is technical compliance, which is about the legal and institutional framework and the competent authorities’ powers and procedures.  The second is an effectiveness assessment, which is about the extent to which the legal and institutional framework is producing the expected results.

Blacklist and Greylist

Countries that don’t meet the FATF’s assessment standards to a certain degree may be put on the FATF blacklist or the FATF greylist.  The blacklist is formally called the “Call for action”-list. The greylist is formally called the “Other monitored jurisdictions”-list.

FATF describes the jurisdictions on the blacklist as having significant strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing.  For all countries on the blacklist, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence towards them. 

This imposes a particular pressure on businesses and the economies in these countries.  In the most serious cases, countries are called upon to apply countermeasures to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing risks from these countries.  Over the years, the blacklist has reduced significantly; currently, only Iran and North Korea remain on that list.

The greylist currently comprises jurisdictions such as Panama, Bahamas, and Pakistan.

United Nations Office on Drugs and Crime

The next relevant organization in the field of AML regulation is within the United Nations.  The United Nations maintains the so-called United Nations Office on Drugs and Crime, or UNODC, established in 1997.  It is responsible for carrying out the Global Programme against Money-Laundering, Proceeds of Crime, and the Financing of Terrorism.

The Global Program’s broad objective is to strengthen Member States’ ability to implement measures against money-laundering and the financing of terrorism and assist them in detecting, seizing, and confiscating illicit proceeds.

Why is this important, or why is this relevant? As part of the United Nations Organization, countries are required to comply with globally accepted standards.  The UNODC helps countries to achieve this by providing relevant and appropriate technical assistance.

In particular, the UNODC follows three UN Conventions that have been adopted and contain specific provisions for AML and CFT.  These are the International Convention for the Suppression of the Financing of Terrorism of 1999, the UN Convention against Transnational Organized Crime of 2000, and the UN Convention against Corruption of 2003.

With this UNODC and the related conventions, the UN has capacities and a special mandate to help the Member States ratify and implement the international standards related to money laundering and terrorist financing.  That’s why it is relevant.

Wolfsberg Group

The Wolfsberg Group is an association of thirteen global banks that aim to develop frameworks and guidance for managing financial crime risks, particularly concerning Know Your Customer, Anti-Money Laundering, and Counter-Terrorist Financing policies.

The Group came together in 2000, at the Château Wolfsberg in north-eastern Switzerland, in the company of representatives from Transparency International, including Stanley Morris and Professor Mark Pieth of the University of Basel, to work on drafting anti-money laundering guidelines for Private Banking.  The Wolfsberg Anti-Money Laundering Principles for Private Banking were subsequently published in October 2000, revised in May 2002, and again most recently, in June 2012.  There is also an Asia-Pacific chapter of the Group, established in January 2019.  Its work complements that of the wider Wolfsberg Group.  It provides an important forum for discussing effective financial crime risk management in the Asia-Pacific. It promotes understanding of Wolfsberg Group publications across the region.  

Since the first set of AML Principles was released, the Group has published many documents, whether Principles, Guidance, Frequently Asked Questions or Statements.  These can all be found on the Wolfsberg Group’s website.

Egmont Group

Last but not least, let us briefly talk about the Egmont Group.  But before speaking about the Egmont Group, we have to discuss the term Financial Intelligence Unit, or FIU.

This gets us back to the FATF.  More precisely, this gets us the FATF Recommendation number 29, which says that countries should establish a financial intelligence unit (FIU) that serves as a national center for two things:

The receipt and analysis of suspicious transaction reportsThe receipt and analysis of other information relevant to money laundering, associated predicate offenses, and terrorist financing.

National FIUs collect information on suspicious or unusual financial activity from the financial industry and other entities or professions.  FIUs are normally not law enforcement agencies.  Their mission is to process and analyze the information received.  If sufficient evidence of unlawful activity is found, the matter is passed to the public prosecution agencies.

Now the Egmont Group is named in full Egmont Group of Financial Intelligence Units.  And you might already guess quite correctly what it is.  The Egmont Group is an informal network of over 160 financial intelligence units around the world.

The Egmont Group’s goal is to provide a forum for FIUs worldwide to improve cooperation in the fight against money laundering and financing of terrorism and foster the implementation of domestic programs in this field.

Because the Egmont Group provides support to member FIUs, it is considered a relevant standard-setting body.

There are many other relevant standard-setting bodies.  Depending on whom you speak to, in which industry you operate, or whey you are in the world, these standard-setting bodies differ.

Final Thoughts

Relevant organizations and standard-setting bodies in AML and CTF regulation is needed because when AML/CFT controls are effectively implemented, they reduce the negative effects of criminal economic activity while also promoting financial market integrity and stability.

New measures are being implemented around the world to combat money laundering and terrorism financing. These measures affect or will affect all financial service providers, including those who work with low-income communities. This paper summarizes the international framework for anti-money laundering (AML) and counter-terrorism financing (CFT) for financial service providers who work with low-income people and relevant organizations and standard-setting bodies in AML and CTF regulation will help.

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