Have you ever wondered how much money is laundered each year? According to United Nation Office on Drugs and Crime, the amount of money laundered annually is 2 - 5% of the global GDP – this is equivalent to nearly 800 billion to 2 trillion US Dollars.
As this crime is affecting us globally, all institutions, whether its financials or non-financials, have to not only increase their knowledge on local trends and exposures, but should also understand international AML initiatives and best practices that are implemented in order to combat money laundering and terrorism financing. Compliance professionals in particular should keep on top of international AML initiatives and train regularly.
1. Financial Action Task Force (FATF)
FATF is an inter-governmental body formed in 1989 in Paris to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing. These standards are set out in the 40 recommendations. These recommendations were first issued in 1990 and were revised subsequently in 1996, 2003 and 2012. You can access these recommendations via the following link: http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF_Recommendations.pdf
The FATF currently comprises 35-member jurisdictions and 2 regional organisations.
2. Basel Committee on Banking Supervision (BCBS)
BCBS was established in 1974 by the central bank governors of the G10 countries. The committee is the primary global standard setter for the prudential regulation of banks, and currently consists of 45 members from central banks and bank supervisors in 28 jurisdictions.
Some of their important work includes the Customer Due Diligence for Banks Paper in 2001 and the Consociated KYC Risk Management Paper in 2004 which was subsequently updated in 2016.
3. The Wolfsberg Group (TWG)
TWG was established in 2000 in Switzerland and is an association of 13 global banks aiming to develop frameworks and guidance for the management of financial crime risks - particularly with respect to KYC, AML and CFT policies.
One of their latest works published in 2018 was the Correspondent Banking Due Diligence Questionnaire (CBDDQ). This was created in order to set an enhanced due diligence standard for cross-border and/or other higher risk correspondent banking relationships.
5. USA PATRIOT Act
On October 2001, after the attack of 9/11 the US Congress enacted the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) to strengthen money laundering laws and the Bank Secrecy Act (BSA) in the US.
The implication of this Act is not only on the US institutions but also on non-US institutions that conduct business in US.
One of the key provisions of this Act was to control the international access to the US financial
system and as a result a range of AML and terrorist financing provisions impacting foreign businesses were implemented accordingly
5. European Union AML Directives (“AMLD”)
In 1991 Council of the European Communities introduced its 1st AMLD (Directive 91/308/EEC).
In 2001, 2nd AMLD (Directive 2001/97/EEC), in 2005, 3rd AMLD (Directive 2005/60/EC) and in 2015, 4th AMLD (Directive 2015/849) were adapted.
On the 19th April 2018, European Commission welcomed the adoption of 5th AMLD by the European Parliament. The new rules are intended to bring more transparency in order to improve the fight against money laundering and terrorist financing across the European Union.
These directives apply only to EU member states and not to other countries, however, the Academy recommends that compliance professionals consider these directives as international best practices and implement them on their policies and procedures where necessary.
Article written by Souzan Esmaili
Associate Director, MENA
Great Chatwell Academy of Learning