Developing an AML/CFT Strategy in the Context of International Standards

1. Developing an AML/CFT Strategy in the Context of International Standards Heba Shams (World Bank) & Nadim Kyriakos –Saad (IMF) World Bank

2. The Scope of Discussion • What is an AML/CFT strategy? • How does a country develop a national AML/CFT strategy? • What is the impact of international standards on domestic strategy making?

3. Two Central Questions • Does every country need an AML/CFT framework? • In a new global context there is a need for a new type of governance. • Is there a scope for a domestic strategy in the context of international standards?

4. INTERNATIONAL INSTRUMENTS • UN Convention Against Illicit Traffic in Narcotics Drugs and Psychotropic Substances (1988) (Vienna Convention) • International Convention on the Suppression of the Financing of Terrorism (1999) (SFT Convention) • UN Convention Against Transnational Organized Crime (2000) (Palermo Convention) • UN Convention Against Corruption (2003) (Merida Convention)

5. INTERNATIONAL STANDARDS • FATF Forty Recommendations on Money Laundering (2003) • FATF Special Recommendations on Terrorist Financing (2001) (including Special Recommendation XI on requirements for cash couriers)

6. KEY ASPECTS OF A LEGAL FRAMEWORK • Money laundering as a criminal offence (applicable to a wide range of predicate offences) • Financing of terrorism as a criminal offence • Regulatory and supervisory requirements for financial institutions • Provisions requiring financial institutions and designated non-financial businesses and professions to undertake customer due diligence, maintain records, report suspicious transactions, and maintain internal procedures and controls

7. KEY ASPECTS OF A LEGAL FRAMEWORK • Provisions for the establishment and operation of a national financial intelligence unit for receiving (and, as permitted, requesting), analyzing and disseminating suspicious transaction reports and related information regarding potential money laundering or terrorist financing

8. KEY ASPECTS OF A LEGAL FRAMEWORK • Provisions requiring financial institutions to include accurate and meaningful originator information on fund transfers and related messages (such information to remain with the fund transfers and related messages through the payment chain) • Provisions requiring persons providing a service for transmission of funds or value, including transmission through an informal funds or value transfer system, to be licensed or registered and subject to relevant AML/CFT requirements

9. KEY ASPECTS OF A LEGAL FRAMEWORK • Provisions for strengthening the transparency of legal persons and arrangements such that the beneficial ownership and control of these legal persons and arrangements can be determined • Provisions for preventing the use of non-profit organizations for the financing of terrorism

10. KEY ASPECTS OF A LEGAL FRAMEWORK • Provisions for detecting cross-border transportation of currency and bearer negotiable instruments and enabling the authorities to stop or restrain currency or bearer instruments that are suspected to be related to money laundering or financing of terrorism, or that are falsely declared or disclosed • Law enforcement measures for freezing, seizing and confiscating proceeds and instrumentalities of crime and terrorist property • Provisions for strengthening international cooperation in mutual legal assistance and extradition • Effective, proportionate and dissuasive sanctions against breaches

11. Strategy 101 • Strategy is a process of drawing a map between the present and the future as we see it. • A good strategy should: • have clear objectives. • be based on thorough understanding of the problem. • be based on good analysis of the policy and implementation options and constraints. • Have mechanisms of feedback and amendments.

12. How to Develop a Strategy: A Frameowrk • Analytical work. • Understanding the problem. • How it is currently being handled and the gaps. • The institutional and political context. • Forming a strategy team. • Sponsorship. • Stakeholders • Defining the ultimate goals and objectives of the intervention. • Developing the policy and implementation design. For a good source on strategy in government see Strategy Survival Guidebook (Prime Minister’s Strategy Unit, UK Government).

13. AML/CFT Strategy: The Analytical Work • Understanding the problem • The limitations of existing solutions. • Institutional analysis. • The relevance of comparative experience. • International constraints and opportunities. • Existing tools for analysing the ML and TF problems and the response.

14. AML/CFT Strategy: Forming a Team • Identifying a champion. • The multidisciplinary nature of the team. • Issues of institutional and sectoral culture. • Serving the ownership objective.

15. AML/CFT Strategy: Defining Goals • What is the vision behind AML/CFT? • Multiple Objectives. • Preventing the abuse of the financial sector. • Preventing the abuse of other businesses and professions. • Facilitating international co-operation. • Enhancing access to information for law enforcement purposes • The persistent expansion of AML/CFT and its implications for strategy making.

16. AML/CFT Strategy: Policy and Implementation Design • Policy options in AML/CFT • The scope for policy choice in the context of the international standards. • Different policy instruments: • Laws and Regulations. • Economic instruments. • Awareness raising. • Creating incentives for self-regulation.

17. Policy Costs and Trade-Offs • Cost of compliance. • Access to finance. • Restrictions on legitimate business transactions. • Trade and services liberalisation. • Procedural protection and safeguards.

18. Strategy and Inter-Agency Coordination • Why is inter-agency coordination an issue? • The role of strategy development in addressing the inter-agency problem. • Stakeholders ownership and political commitment to AML/CFT

19. Conclusion • Developing an AML/CFT strategy is a process that can contribute to resolving some of the main obstacles to the successful implementation of AML/CFT regimes. • International standards do not substitute for the informed development of a domestic AML/CFT strategy.