Global Financial Watchdog to Evaluate Countries’ Anti-money Laundering Systems More Frequently

Ndubuisi Francis

Amid the recent controversy over Senate’s plan to enact a new anti-money laundering law, the global financial watchdog, the Financial Action Task Force (FATF) has said it would assess its member countries more frequently to assist them further in tackling money-laundering and combating terrorism financing.
According to Wall Street Journal, FATF found that out of the 120 countries it has assessed so far, 76 per cent of them have set up a broad set of anti-money laundering (AML) rules and regulations that would enable them to “follow the money” in combating crimes and terrorism, compared with about 36 per cent in 2012.
FATF, a Paris-based organisation which sets anti-money-laundering law standards, said it would shorten its coming fifth round of mutual evaluations to a six-year cycle, according to a report on the state of countries’ effectiveness and compliance published Tuesday.
The current mutual evaluation is usually held around once every 10 years, according to a FATF spokesman.
FATF’s mutual evaluations consist of peer reviews in which members from different countries assess the effectiveness and implementation of one another’s anti-money-laundering measures. FATF said the evaluations entail a description and an analysis of a country’s financial safeguards to prevent the illicit abuse of its financial system and recommendations to further strengthen it.
For the next round of mutual evaluations, FATF said it would also focus more on each countries’ highest risks and adopt a follow-up process that would emphasize the specific actions countries need to take.
But FATF said many countries continue to adopt laws and regulations in a “tick box” approach, which makes it difficult for countries to take effective measures to tackle the specific illicit finance risks they face. FATF said countries would need to make significant improvements to their AML systems in the next round of peer reviews.
In addition, countries also need to focus on tangible results. FATF said many national authorities still face challenges in investigating and prosecuting complex, high-profile cross-border cases. Countries also still need to focus on the prevention of illicit use of anonymous shell companies and trusts, FATF said.
Rick McDonell, FATF executive secretary between 2007 and 2015, said a shorter evaluation cycle is a good thing and would help countries improve the effectiveness of their AML systems faster.
“More frequent testing of the country’s system, it focuses the mind and it focuses the government’s policies,” Mr. McDonell said.
The report, which was based on the fourth round of evaluations with a focus on the strengths and weaknesses of countries’ AML frameworks, was the first of its kind, according to FATF President Marcus Pleyer. The public report was produced as part of FATF’s strategic review to make its mutual evaluation process timelier and more effective, he said.
The group also published on Tuesday, the methodology and procedures it intends to adopt for the fifth round of mutual evaluations.
“We will put an even greater focus on ensuring that countries not only pass the relevant laws and regulations, but also effectively implement these laws,” Mr. Pleyer said in the report. “This will help prevent and prosecute money laundering, terrorist financing and financing of proliferation of weapons of mass destruction in a manner consistent with their risks.”