Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL)

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EFFECTIVE GLOBAL AML/CFT SYSTEM DEPENDS ON WORK OF REGIONAL GROUPS


The following remarks were delivered on 7 December 2010 by FATF President Mr. Luis URRUTIA CORRAL before the 34th Plenary Meeting of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) in Strasbourg, France.


Good afternoon, Mr. Chairman, Executive Secretary, distinguished delegates and colleagues.

I am very pleased to be in Strasbourg today to address the 34th MONEYVAL Plenary meeting, and I would like to thank you for the invitation to attend this meeting and be able to address you here at the Council of Europe.

In October, I had the pleasure of chairing the FATF Plenary meeting for the first time.  During that meeting, the FATF considered its mandate for this year under the Mexican Presidency, which I have the honour of holding until June 2011.  The FATF Plenary adopted our proposed mandate, and I would like to outline some of its key points in my remarks to you here today.

This new mandate covers a broad range of issues; however, there is one recurrent theme that is both fundamentally important for my Presidency and closely linked to the work of MONEYVAL and other regional bodies:  It is the need to reinforce the global AML/CFT network.

The FATF and the FSRBs are essential players in this network and thus have an essential role in ensuring the effective implementation of AML/CFT standards worldwide.  We must recognise the progress made so far by the FATF and its associate members.

At the same time however, we must be willing to seek out and put into place improvements in the global AML/CFT network that will help us do our job better.

In my view, we need to strengthen our work in a number of areas.  Some of these areas include improved and more effective implementation of the FATF standards, finding ways to assist in the fight against corruption and factoring in financial inclusion as part of our efforts.  The FATF has taken these issues on as objectives that will be pursued during the current Presidency.

In order for us to meet these objectives however, the FATF must depend on a well-functioning global AML/CFT system, which includes close co-operation with its associate members.  Looking ahead then, I believe that any future improvements to the global AML/CFT network will likely mean moving into a new stage in the relationship between FATF and its associate members.


Associate Membership


I would like to begin by saying a few words about associate membership.  As you know, a few years ago, the FATF established associate membership as a new status for FATF-style regional bodies (FSRBs).  This new status was intended to give FSRB members access and input to FATF meetings, documents and discussions on a level equivalent to that which FATF members themselves have.

The FATF remains convinced that granting equivalent access to its information and decision-making processes will strengthen the work of both the FATF and FSRBs.

MONEYVAL was among the first three FSRBs to be granted associate membership status in June 2006, along with the APG and GAFISUD.  Then, at the June FATF Plenary meeting this year, the last three FSRBs became associate members.  The FATF has now thus started looking at associate membership to evaluate its impact on reinforcing the work of the FATF and its associate members.

To this end, I plan to begin a discussion at the next FATF Plenary meeting in February 2011 on this issue and will therefore be consulting with and seeking the input from all associate members.

As a key part of this discussion, I plan to focus on the expectations held by the FATF for its associate members and, at the same time, what expectations associate members have regarding the FATF.  This will need to be done while keeping in mind why the FATF and FSRBs were created in the first place.

The FATF Presidents and the Secretariat have access to all eight associate member meetings, as do some FATF members that participate in one or more associate members as members, observers or COSUNs. 

Through all of this co-operation, the FATF has gained a clearer understanding of what associate members can be expected to achieve.  It is now time for us   all   to reflect on this,   put our collective thoughts together and consider what works well and what could be improved.

In this regard, I would like to touch on a couple of areas:

First, I would mention the mutual evaluation process – the principal mechanism that the FATF and all associate members share for ensuring effective implementation of the FATF Recommendations.  The MONEYVAL evaluation process is highly developed and has played a key role in helping jurisdictions in the region to build AML/CFT systems.

MONEYVAL has in fact achieved a great deal in this area.  Some other FSRBs are not yet quite so far and will have a certain amount of work to reach the level that MONEYVAL has.

I would add that, in further recognition of the importance of its work, the Committee of Ministers of the Council of Europe has seen fit in the new statute of MONEYVAL to raise its status as a monitoring body.  It thus now becomes directly answerable to the Committee of Ministers in assessing compliance with AML/CFT standards and the effectiveness of implementation.

While recognising the success of MONEYVAL, I should also stress that there are nevertheless particular challenges we all share in the conduct of mutual evaluations.  For example, we must all remain vigilant in ensuring that our interpretation of the FATF standards is both current and consistent – not only within each FSRB, but also between the FATF and across all FSRBs.

This is important because the overall strength of the global AML/CFT system depends on a consistent approach in implementing the standards.  Toward this end, the FATF and MONEYVAL already share evaluators, participate in our respective mutual evaluation discussions, organise joint assessor training seminars, etc.

Nevertheless, the FATF and the FSRBs may need to look collectively at other mechanisms to ensure that the FATF standards are applied in the same way by the FATF and all of its associate members.

Second, I raise the issue of follow-up to mutual evaluations.  MONEYVAL has strong processes for monitoring the progress in implementing AML/CFT measures (including its compliance enhancing procedures).

I am pleased to see that MONEYVAL not only applies these processes but also continues to refine them over time.  Moreover, MONEYVAL has certainly not been afraid of indicating cases in which its individual members have not made sufficient progress in establishing effective AML/CFT systems.

The follow-up processes of some other FATF associate members have not always been consistent or achieved desired results however.  In my view, the FATF and all FSRBs will need to work together to ensure that follow-up procedures across the whole global AML/CFT system work toward the same goals with similar timeframes and similar consequences for inaction.

Third, as my predecessor mentioned in his remarks to you last year, the Council of Europe makes a specific contribution to FATF work  through its role in monitoring implementation of the relevant Council of Europe conventions (in particular, the Council of Europe Convention on the Laundering, Search, Seizure and Confiscation of Proceeds from Crime and the Financing of Terrorism).  This work is unique and represents a critical link between one of the key international legal instruments for fighting crime and the global AML/CFT efforts we all share.  It seems to me that it might be useful to consider some more concrete ways that the practical experience gained through implementation of measures in such international instruments could be fed back into the work of the FATF in development of guidance.

Now, coming back to the planned discussions on FATF associate membership status by the next FATF Plenary, I expect that these will result in a call for an assessment of how associate members are living up to our expectations, an assessment that might then be considered by the FATF Plenary in June 2011.

Mr. Chairman, I encourage you to take a particular interest in this issue and to participate in our February and June 2011 Plenary meetings to ensure that MONEYVAL’s unique experience – as well as the particular challenges it faces – can be heard.

I will continue to follow the work of all of the associate members with keen interest throughout the remainder of my presidency, and I particularly look forward to hearing MONEYVAL’s perspective regarding FATF associate membership.


Standard setting


Let me now turn to another important issue – standard setting.

It is clear that money launderers and terrorist financiers quickly adapt their ways to try to circumvent our improved efforts to detect, investigate, prosecute, convict and confiscate.

The FATF therefore has no choice but to ensure that its standards remain a comprehensive and up-to-date framework for combating money laundering and terrorist financing.  Since the revision of the standards adopted in June 2003, we have amended the FATF Recommendations as needed, and — with the end of the FATF’s third round of mutual evaluations approaching — we have now begun a focussed review of the Recommendations.

Individual member jurisdictions of associate members have made their voice heard in this process.  Some have provided comments directly to the FATF on discussion and consultation papers.  Others have spoken through their respective Secretariats.  Whatever model fits best, it is important to realise that this is a rare chance for FATF and associate members — including especially their individual member jurisdictions — to have an influence on the FATF standards that will be later used to assess them.

As I have stated at other associate member meetings, I urge you as well to take advantage of this opportunity.  Even if your jurisdiction lacks the resources to follow all aspects of this process, I encourage you to remain informed of progress of these discussions and to have your experts begin assessing the consequences that changes in the FATF standards will have for your jurisdiction.

Staying informed at least will enable you to be pro-active in bringing your AML/CFT system into line with the updated FATF standards when they are agreed.

The review is ongoing, and at our last meeting in October, the FATF Plenary discussed for the first time a consolidated report of three sub-working groups on the various developments that have taken place over the previous year.  You can get a copy of this report through the MONEYVAL Secretariat.

Some of the issues raised include beneficial ownership, mutual legal assistance, the risk-based approach, tax crimes as predicate offences for money laundering, operational issues and the incorporation of certain issues relating to corruption.  More discussion on these issues will take place over the next year, and there are still other issues that are to be dealt with, such as the structure of the FATF Recommendations, data protection and privacy issues and exchange of information within financial groups.

We also conducted a meeting with private sector representatives to get their views on the aspects that the FATF is raising as part of the review process that we are following.  The meeting was held two weeks ago in Paris and brought together approximately 100 participants representing the banking, securities, insurance, legal, accounting and real estate sectors, and it also included members from non-governmental organisations concerned with anti-corruption, financial transparency and integrity, and other industries involved in financial inclusion-related issues, such as mobile phone service providers. 

Issues discussed in that meeting were presented in the public document that we posted on our website and reflect the main points contemplated in the progress report reviewed by our Plenary last October.  The main comments discussed during the meeting with the private sector will be outlined in a document that we will circulate to our members and observers soon.

Again, I encourage MONEYVAL member jurisdictions to take maximum advantage of this opportunity to have your voice be heard as part of these discussions.


Fighting corruption


I would finally like to spend a little time on two other important issues for the Mexican presidency — fighting corruption and financial inclusion.

Fighting corruption   is   increasingly   recognised as a global priority.  The G20 Leaders in the conclusions of their Pittsburgh meeting called on the FATF to give higher priority to this issue.   I would like to point out what we are doing to respond to this call.

First, the FATF is taking corruption into account in its review of the 40+9 Recommendations.  I should stress that this does not mean the FATF will become the standard-setter for corruption.   What   it   does   mean is that we are willing to adapt our AML/CFT standard   if   this might also benefit the fight against corruption.

We are looking at incorporating certain aspects of the Merida Convention as part of our review of the 40+9 Recommendations; however, we   are   also looking at the existing measures on customer due diligence, beneficial ownership and transparency from the perspective of how they might assist  in  fighting corruption.

Second, the FATF is moving to build contact with anti-corruption experts.  As an initial step, FATF has just released an information note to raise public awareness of how the FATF Recommendations help combat corruption.  We want to elaborate on this further, explain the AML/CFT Standard to anti-corruption experts, learn what elements are useful and share this knowledge with relevant stakeholders.

Third, the FATF is engaging in closer co-operation with anti-corruption standard-setters.  The added value that the FATF can bring to the anti-corruption campaign is its experience with a unique enforcement infrastructure (for example, its mutual evaluation process), which has a positive effect on ensuring global compliance with international standards.

In addition, probably more than any other standard setter, the FATF has a frequent interaction   with   and   knowledge   of   the financial sector.  In our dialogue with standard setters, the FATF will be   thus able to share its best practices in this area.


Financial inclusion


Now let me turn to financial inclusion, which is another important topic for the Mexican presidency of the FATF.  Over the years, signals have reached the FATF that its standards are in some ways an impediment to financial inclusion.  I would add that perhaps the FATF’s unique enforcement structure has encouraged regulators and legislators to follow the FATF standard in an overly strict manner and without taking into account the type of customers envisaged by the term “financial inclusion”.

Nevertheless, it is important for FATF to ensure that AML/CFT measures do not impede access to financial services for the low-income populations.  Many of the FATF Recommendations that are designed to be implemented taking ML/FT risk into account focus on customer due diligence, transaction monitoring and record keeping.

These measures can only be implemented for those sectors of the population that have access to the financial sector.  In this respect, efforts to foster financial inclusion and AML/CFT measures can in fact reinforce each other.

The FATF is increasing its efforts to take financial inclusion into account in its work.  It will also actively engage with other relevant bodies, such as the World Bank, to further promote access to the financial sector for all people.  I have asked other FSRBs to share any relevant experience in this area with FATF, and I would therefore invite MONEYVAL to do the same.


Conclusion


Mr Chairman, the mandate for the current FATF Presidency includes many other initiatives   that I hope will help reinforce the global AML/CFT structure, but time is too short for me to outline them all here right now.

I would like to mention one further measure that I believe will also foster closer co-operation between the FATF and the FSRBs.  I have decided that the meeting of FATF and all FSRB Presidents held in June 2010 should become a permanent part of the annual FATF calendar.  Therefore, the next such meeting will be held in Mexico City in June 2011, and I hope that I will see you there Mr Chairman.

The FATF must rely on MONEYVAL — as well as the other FSRBs — to support effective implementation of the FATF standards on a global level.  MONEYVAL has traditionally had an important voice in FATF work as one of the older and more established FSRBs.

I would therefore urge you to continue this participation and as necessary to reinforce it.  The FATF can only take into account the particular challenges MONEYVAL countries face in implementing FATF standards if these challenges are brought to the table.

Lastly, I look forward to increased dialogue between MONEYVAL and the FATF on ways that we may be able to further strengthen the relationship between FATF and its associate members.

Mr Chairman and delegates,

I thank you for giving me the opportunity to address you today.  I wish you all well for the remainder of this Plenary meeting and in your future work.