FATF Paris Summit Underscores Continuing AML and Terrorist Financing Problems

By Victor Comras

FATF�s Fall 2005 summit meeting in Paris, October 12-14th brought together some 400 delegates from 32 jurisdictions and 16 international organizations to review the progress made in combating money laundering and terrorism financing. Highlights of the meeting included the removal of Nauru from FATF�s Non Cooperating Country List, review of the results of FATF�s evaluation of the anti-money laundering and counter-terrorist financing systems in Australia, Italy and Switzerland; and the launching of a new FATF project, in partnership with the Asia/Pacific Group on Money Laundering, to explore the symbiotic relationship among corruption, money laundering and terrorist financing.

FATF removed Nauru, the tiny Pacific Island that had become the favorite haven for Russian money laundering, from its Non Cooperating Country list after the Island took action to abolish its 400 shell banks. This leaves only two countries � Myanmar (Burma) and Nigeria on the list. Originally envisaged as a prime tool for pressing for greater international anti-money laundering action, the list has, overtime become next to meaningless. The fact that a country is not on the list, or has been removed there from, seems to have little to do any more with whether or not such countries are effectively combating terrorism financing or money laundering. If that were the case, the fact that only Myanmar (Burma) and Nigeria were still on the list would allow us all to sleep more soundly. The program began in February 2000 when FATF published 25 criteria identifying detrimental rules and practices that impeded international cooperation in the fight against money laundering. By September 2001 FATF had identified 23 Non-Cooperating jurisdictions. No additional jurisdictions were reviewed since that time. Over the years this list was whittled down to just a few countries as countries acted to amend their laws and rid themselves of the offensive counter-AML measures. But, this became more of a paper exercise than a realistic assessment of what countries were actually doing to deal with money laundering and terrorism financing. Last February the Cook Islands, Indonesia and the Philippines were removed from that list. Egypt, Russia, Ukraine and Guatemala have also been removed from the list during the last few years.

There is some hope that FATF will again become more aggressive in dealing with non cooperative or complying countries. Last year FATF armed itself with new authority to identify and use its Recommendation 21 procedures and counter-measures against, countries �posing a particular money laundering or terrorism financing risk.� But, it has yet to do so.

FATF�s in-depth review of Australia, Italy and Switzerland�s AML/Terrorism Financing measures provided the delegates a meaningful occasion to consider remaining problems and loopholes. Similar evaluations were conducted in Belgium and Norway last June. High on this list of remaining generic problems is how to get a better handle on charities and non-banking alternative transfer mechanisms. This also includes financial transactions outside of the traditional banking structure � such as securities-related operations, real property, Jewelry, luxury goods, and cash transfers. There are also problems in dealing with shared assets and assets held beneficially. FATF�s preliminary overall assessment was that �while FATF members are making very serious efforts to implement new standards, effective implementation will take further effort. Therefore, the FATF will continue to closely monitor the progress of all its members."

Over the past few years FATF has also branched out by assisting the creation of regional AML/Terrorism financing organizations. FATF has partnered with many of these groupings to stimulate greater local and regional AML/Terrorism Financing cooperation beyond FATF�s much more limited membership. The latest joint program will be conducted with the Asia/Pacific Group on Money Laundering. They intend to explore the symbiotic relationship among corruption, money laundering and terrorist financing and how the FATF�s AML/CFT experience can best be used to combat these combined threats.

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