09 March, 2022
Paris, 4 March 2022- The sixth Plenary of the FATF under the German Presidency of Dr.Marcus Pleyer concluded today.
Delegates representing the 206 members of the Global Network and observer organisations, such as the IMF, the United Nations and the World Bank, met for four days of meetings. The event took place in a hybrid form with the majority of participants able to travel to meet in person in Paris due to gradual easing of COVID-19 related restrictions in many countries.
The Plenary approved key work that will prepare for the next round of mutual evaluations and finalised an update to Recommendation 24, to improve transparency of beneficial ownership of legal persons. The FATF approved a report on the money laundering and terrorist financing risks of migrant smuggling, and agreed to release a guidance for public consultation that will help the real estate sector to implement risk-based measures to better detect and prevent money laundering.
The FATF agreed to begin work on enhancing asset recovery by strengthening collaboration between the FATF/FSRBs and the Asset Recovery Networks – CARIN and the ARINs, and also agreed to further consider strengthening Recommendations 4 and 38 on the domestic and cross-border frameworks. Delegations also started new work on the proceeds of the trafficking of fentanyl and other synthetic opioids.
The Plenary also agreed on the appointment of a new President of the FATF (2022-2024).
The FATF reached a milestone with the completion of its strategic review. The review, which began in 2019, aimed to streamline the FATF’s processes to make the next round of mutual evaluations more targeted, timely and effective.
Delegates agreed to make public the findings of a fact-finding stocktake that helped to drive the strategic review forward. The report on the state of global compliance and effectiveness highlights the successes achieved in the global fight against money laundering and terrorist financing, whilst also identifying areas that need further improvement. It also raised a number of important issues which have been addressed in the revised assessment Methodology.
As a result of this strategic review, the FATF finalised and approved the FATF Methodology to assess countries’ actions to combat money laundering and the financing of terrorism and proliferation, and the FATF Procedures for the fifth round of mutual evaluations.
The fifth round of mutual evaluations will have a greater focus on risk and context to ensure that countries prioritise their efforts in areas where the risks are highest, and a stronger focus on designated non-financial businesses and professions. The next cycle of mutual evaluations will also be significantly shorter, with a streamlined and stronger follow-up process that focuses primarily on improving effectiveness and ensuring that countries which do not take effective actions are held to account.
While these documents refine and strengthen the FATF’s future assessment framework, the responsibility for effective action against money laundering and terrorist financing lies with each of the countries of the FATF Global Network.
The FATF will now prepare these documents for publication on the FATF website.
Strategic Vision for the Global Network
The fight against money laundering and terrorist financing requires a global response. The work of the Global Network, which brings together the FATF and nine FATF-Style Regional Bodies (FSRBs), as well as work with relevant observers, is crucial.
The Plenary agreed on the strategic vision for the Global Network, which will strengthen the FATF/FSRBs partnership that forms the backbone to the successful assessment and compliance with global anti-money laundering and counter terrorist financing (AML/CFT) measures.
The strategic vision supports FATF and FSRBs’ collective efforts to achieve their common objectives of combating money laundering and the financing of terrorism and proliferation, and of fostering effective AML/CFT systems.
Monitoring Compliance with the FATF Standards
Mutual Evaluation of France
The FATF concluded that France has a robust and sophisticated AML/CFT framework, that is very effective in combating the financing of terrorism, the confiscation of criminal assets and international cooperation. France is also achieving particularly good results in the use of financial intelligence, money laundering investigations and prosecutions, and the implementation of targeted financial sanctions. France however needs to do more in certain areas, such as the supervision and implementation of preventive measures for professionals involved in the activities of legal persons and real estate sector, as well as improving the monitoring of the non-profit sector to prevent the potential misuse for terrorist financing.
The FATF will publish this report in May, after a quality and consistency review.
Jurisdictions under Increased Monitoring
Jurisdictions under increased monitoring are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to extra checks. In line with the flexible procedures adopted in February 2021 to allow FATF to continue its monitoring programme in light of the COVID-19 pandemic, the FATF has updated its statements for countries under review.
New jurisdictions subject to increased monitoring: United Arab Emirates.
- Jurisdictions under increased monitoring
- High-Risk Jurisdictions subject to a Call for Action (unchanged from February 2020)
Jurisdiction No Longer Under Increased Monitoring – Zimbabwe
The FATF congratulated Zimbabwe for the significant progress it has made in addressing the strategic AML/CFT deficiencies previously identified by the FATF and included in its action plan. Zimbabwe will no longer be subject to the FATF’s increased monitoring process. This comes after the country received an on-site visit. Zimbabwe will work with FATF regional partner ESAAMLG, of which it is a member, to continue strengthening its AML/CFT regime.
Annual Training Programe
The Plenary discussed and agreed on the annual training plan for 2022 that includes training sessions at the FATF Training Institute in Busan, training in FATF Global Network member jurisdictions, as well as online training through the FATF’s e-learning platform. The training plan responds to the needs identified by members of the FATF Global Network at the end of 2021, which includes training that aims to assist countries subject to FATF’s International Co-operation and Review Process. The training sessions are open to government officials of the Global Network and will help strengthen understanding of the FATF Standards and how to use them to detect, prevent and punish money laundering and the financing of terrorism and proliferation.
New Beneficial Ownership rules to tackle money laundering
Anonymous shell companies and other businesses enable organised criminal gangs, the corrupt and sanctions evaders to launder their dirty money. That is why the FATF has agreed on tougher global beneficial ownership rules to stop criminals from hiding their illicit activities and dirty money behind secret corporate structures.
The FATF has agreed to revise Recommendation 24 and its Interpretive Note, which require countries to ensure that competent authorities have access to adequate, accurate and up-to-date information on the true owners of companies.
Countries will now be required to ensure beneficial ownership information is held by a public authority or body functioning as a beneficial ownership registry, or an alternative mechanism as efficient. Countries will also be required to ensure that competent authorities can rapidly and efficiently access beneficial ownership information. Authorities will have to assess and mitigate the money laundering and terrorist financing risks associated with foreign companies, to which their countries are exposed. The FATF has also agreed to ban new bearer shares and to strengthen disclosure requirements for existing bearer shares and for nominee arrangements, which will stop these being used to hide money laundering.
In the course of revising Recommendation 24 and its Interpretive Note, the FATF has held two rounds of public consultations. The FATF sought views from affected stakeholders, particularly on the multipronged approach to collect beneficial ownership information, bearer shares and nominee arrangements, the risk-based approach, and access to information. The FATF took these contributions into account and has refined the text of the amendments accordingly. The FATF received strong support for its proposed amendments to strengthen standards on beneficial ownership and transparency and thanks all stakeholders who took part in the process.
Money Laundering and Terrorist Financing Risks arising from Migrant Smuggling
Every year, millions of migrants seek to escape regional conflict, political instability, persecution and poverty in search of a better future. They can risk their lives at the hands of migrant smugglers who see them as an opportunity to make financial gains and often have little regard for the migrants’ safety. The proceeds generated by migrant smuggling are estimated to exceed USD10 billion per year.
The FATF completed research on the money laundering and terrorist financing risks associated with migrant smuggling. The report finds that while this criminal business has expanded, many countries do not consider it a high-risk crime for money laundering and the associated financial flows are rarely investigated. The report identifies the most common methods to transfer and launder the proceeds of migrant smuggling, from hawala, integration of proceeds into legitimate business such as shops, travel agencies and transport companies, and the increasing use of professional money launderers. Using countries’ experiences, the report provides several recommendations and good practices that allow authorities to better trace criminal proceeds and enhance the effectiveness of money laundering investigations. The report highlights the need for countries to understand the money laundering risks they face from migrant smuggling and to proactively follow the money linked to this criminal activity, including through increased collaboration with national and international authorities and the private sector.
THe FATF aims to publish the report on 22 March.
Risk-based Approach Guidance for the Real Estate
Real estate is a popular and stable choice for investments. Criminals who wish to launder their illicit assets exploit the real estate sector. As a result, real estate professionals have an important role in preventing criminals from misusing the real estate sector for money laundering or terrorist financing.
However, currently the real estate sector generally has a poor understanding of the risks they are exposed to, according to the results of the vast majority of fourth round mutual evaluations. The FATF has developed draft guidance on the risk-based implementation of anti-money laundering and counter terrorist financing measures in the real estate sector. The FATF will publish this report for public consultation and welcomes input from all interested stakeholders before finalising the guidance. This includes the real estate business, but also experts, mortgage lenders and interested non-profit sector organisations. Deadline for comments: 22 April 2022
Unintended Consequences of the FATF Recommendations
The FATF has completed its work to identify and analyse unintended consequences of the FATF Recommendations, with a focus on proactive steps to prevent AML/CFT measures leading to, in particular, de-risking, financial exclusion and undue targeting of NPOs. The Plenary has now agreed to refer the substantive work to the relevant FATF Working Groups who will scope out and refine how FATF can mitigate the unintended consequences of FATF’s Standards without diminishing the effectiveness of global AML/CFT measures. The FATF will continue to engage with external stakeholders as this work develops.
FATF Presidency 2022-2024
This week, the Plenary, took the formal decision to appoint Mr. T. Raja Kumar of Singapore as the next President of the FATF, for a fixed two-year term.
Member countries took this decision following a comprehensive process, led by the current FATF President and which included consultations with all delegations. A number of highly qualified candidates were put forward by the FATF membership, each presenting his/her priorities and vision for the future of the FATF. As a result of this process, the FATF Plenary agreed to appoint Mr.Kumar as the next President of the FATF. Mr. Kumar will take up his duties on 1 July2022, the day after the two-year Presidency of Dr. Marcus Pleyer concludes.