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speech by FATF President Paul Vlaanderen
to the 8th Ad Hoc GIABA Ministerial Committee Meeting
Praia, Cape Verde, 5 May 2010
Mister President,
Honourable Ministers,
and distinguished delegates,
good morning.
1. Introduction
Let me first join in thanking our hosts for their welcome and hospitality. This is my first opportunity to attend a meeting of the GIABA. It is also my first visit to a member country of GIABA. And it is my first time here on this beautiful island. So for me this is a triple pleasure!
I am honoured to be here today at the 8th Ad Hoc GIABA Ministerial Committee Meeting and see the progress made by GIABA in advancing anti-money laundering and counter terrorist financing initiatives in West Africa.
The importance of the work carried out by GIABA cannot be stressed enough. I congratulate you, as the leaders in the region, for the accomplishments so far. GIABA has clearly matured and achieved much since its first ministerial meeting in Dakar nine years ago.
At the same time, as leaders, I call for your continued work to encourage, support and drive the necessary results that are so vital for the fight against money laundering and terrorist financing.
This morning I would like to discuss two major themes with you: two themes which are critical to the success of the fight against money laundering and terrorist financing. The first is the need for a truely global commitment to the objectives of the FATF; we only can win if we all participate. That is what I call the global coverage. The second is that all committed stake holders do what they promised; they all should implement the set principles of the FATF: that is the 40+9 Recommendations. That is what I call global compliance.
2. The need for global coverage
The role of FSRB’s
A unique feature of the FATF is that it has in addition to its 35 members also 8 affiliated sister organisations, the FATF Style Regional Bodies or FSRBs. These FSRBs have a critical role to play. It seems impossible to envisage an FATF as geographically comprehensive and effective as it is today without the FSRB member jurisdictions. FATF affiliates engage in the fulfilment of our common mandate and show ownership of their regional body. This is crucial as the global financial sector has to deal with global criminality; that requires a global answer from governments.
FSRBs, such as GIABA, provide leadership in their regions and are an important means for promoting consistency in application of the FATF standards. I do realise that is difficult. In regions such as yours the challenge for the institution FSRB is particularly evident. GIABAs 15 members speak three different languages and bring diverse experiences and ideas to the table. And I am sure that you as ministers have too many other pressing priorities to deal with in your capitals. It is not easy to manage a regional group and it is not easy to ensure that all are involved equally.
But we all keep trying!
There are now more than 180 jurisdictions across the globe which are members of an FSRB or of the FATF. This means more than 180 jurisdictions have committed to implement the FATF Recommendations. This “FATF Family” is a unique achievement in multilateral cooperation! Together we can strengthen the resistance of each of our countries to money laundering and terrorist financing. Together we can promote stronger institutions, reduce the abuse of public funds and tax evasion, and provide a fair competitive environment for business to grow. Together we can contribute to improving the lives of many people and help develop our countries.
In short: it pays to participate!
Associate membership
For GIABA, the next step within the FATF family is to become an Associate Member. This step is close and will be discussed at this ministerial meeting and at the upcoming FATF Plenary meeting. I know that this is a very high standard to reach. The FATF asks a lot of Associate Members. In addition to meeting the standards required of an FSRB - which themselves are quite stringent - the Associate Members must:
- Have mechanisms which seek to ensure actual and effective implementation of the FATF standards. Importantly, this includes an effective follow-up process along the lines I have mentioned.
- Provide access to the FATF President, Secretariat and members to plenary and working groups meetings, and documents. This includes access to all mutual evaluation discussions and to all mutual evaluation reports adopted by FSRBs.
- Offer the FATF delegation the opportunity to provide input to discussions and decisions (in the same way that FSRBs provide input to the FATF discussions and decisions).
- Allow assessors from FATF members to participate, as appropriate, in mutual evaluation teams.
- Promote the FATF Recommendations and support the actions of FATF at the international level.
- Conduct joint events and joint projects with the FATF. This includes high quality typologies reports which can be published for use by people around the world who are involved in the effort to combat money laundering and terrorist financing.
But I think it is a worthwhile investment; what you obtain as an Associate Member is closer FATF involvement and improved access to information and decision making. Associate membership is a big and necessary step on the road to a full level playing field within the FATF Family. I look forward to being at the FATF Plenary when GIABA becomes an Associate Member.
3. The Trend towards Global Compliance
AML/CFT in Low Capacity Countries
Money laundering and terrorist financing undermine national financial systems. Unreliable sources of investment capital like illegitimate enterprises or financial assets enhance business risks. And increased risks raise barriers to economic activity and development. An example; money laundering destabilizes national economies by a growing demand for cash, adding to the volatility of interest and exchange rates.
I am sure that among the many challenges that you face as ministers is the positioning of your financial sector in the global payments network. Among your goals may be the fight against corruption in the financial sector and the improvement of the investment climate for potential investors. At the same time you may wish to increase access to world financial markets for your economy.
In other words, being part of the world financial infrastructure is likely among your many objectives, as it is an objective of many countries in the world. Consequently, it is in your, and our, interest to work hard to conform to international codes that aim to eliminate abuse of that same global financial network. Countries with weak enforcement of AML/CFT controls damage their reputations in international financial markets, and thus pay higher risk premiums. They are also less effective in attracting international capital flows, including notably foreign direct investment, the oxygen to development!
But there is more; the supply of financial services to the citizens of our countries is also a necessary part of any economic plan. Therefore, the challenge of “financial inclusion” in GIABA countries seems to be a key one. The objective with financial inclusion is that individual clients, particularly also low-income clients must be able to access those financial services that are appropriate to their needs. I do believe that the pursuit of financial inclusion and the pursuit of an effective AML/CFT regime are complementary and by no means conflicting policy objectives. A high degree of the populations’ inclusion in the legitimate and registered financial sector will help people to take part in the formal economy, including its potential for a better life. At the same time it will safeguard a country’s AML/CFT system and thus the integrity of its financial system.
A robust financial sector, including effective AML/CFT controls, is thus for more than one reason an important ingredient for aspiring members of the global economy.
But such a financial sector does not come without costs. It is clear that Low Capacity Countries or LCC’s share characteristics that constrain their capacity to implement AML/CFT measures. The FATF has examined how to reinforce the mutual evaluation process for countries with severe capacity constraints; the objective is more rapid progress on the implementation of the standards.
In February 2008, FATF took an important step in adopting its first policy towards low capacity countries. The so-called ‘FATF Guidance on LCCs’ provides principles which are relevant throughout the process of implementing the FATF standards, including strategic planning and the mutual evaluation process. This week GIABA has taken a very important step in this direction in adopting a comprehensive and useful threat assessment report that responds to your countries’ particular challenges and characteristics. I congratulate you on this as it represents a major step forward. Risk assessments provided for by the report will give us information on the priority areas to be addressed.
Mutual evaluations and follow-up
Assessing the adequate implementation of the agreed international standards is one of the core tasks of FATF and the FSRBs. It all starts with agreeing assessment schedules and procedures; this combined with the need to live up to those schedules and procedures! Without those basic ingredients it is hard to earn international credibility as crime fighter.
No FATF or FSRB member is yet able to fully meet all standards! Every jurisdiction that has been assessed knows how resource intensive the evaluation process is. Once the assessment is completed, it is tempting to move other pressing duties immediately.
However! We need to remember that the effort to implement AML/CFT standards does not stop with the completion of an evaluation. Afterwards, there needs to be effective follow-up: that means that governments of all jurisdictions are required to work hard to remedy any weaknesses identified in these country-examinations. This is an integral part of FATF’s evaluation system.
The LCCs guidance can be used in the follow-up context to prioritize technical assistance with donor bodies or countries in order to get to the next level of implementation. I would strongly encourage countries, and GIABA as a group, to consider implementing the mechanisms proposed in the guidance.
Within GIABA you, as Ministers, drive this agenda across the region. I would kindly invite your committee to pursue its efforts in implementing the mutual evaluation procedures, including its publication policy, and the follow-up processes in accordance with the agreed FATF rules.
The recently introduced public listings by the FATF through its International Cooperation Review Group or ICRG have added a new dimension to issues of follow up. Jurisdictions on the public lists will be invited to work on specific action plans to qualify for delisting. I expect that the issues raised in the action plans will very likely overlap with issues identified for the regular follow up processes.
This all is costly to national administrations, I realise that: but there is a flipside to the coin. We know that the compliance level with the FATF recommendations influences the financial sector of a country. This encourages jurisdictions to enhance compliance with the FATF Standards. Higher compliance means lower corruption and thus, lower cost to the economy. Higher compliance also means lower risks and thus better terms for the financial sector on the global financial markets, which is positive for the economy and the investment climate of a country. These are strong incentives for countries to enhance their compliance.
In short, it pays to comply!
5. Conclusion
I would like to conclude by saying that your countries, as members GIABA, are very welcome to be part of the FATF family and its meetings, processes and projects. The FATF clearly benefits from the input of GIABA and of its members and I am sure that an Associate Membership by Giaba of the FATF will further deepen our relations. Thus the battle against ML and TF can become really global!
The FATF looks forward to working with GIABA in furthering our mutual objectives. There is substantial work to be done but, with commitment, I know that we will be able to meet these challenges. With global compliance we will reach our common objectives!
I can see that you have a full agenda in front of you. I encourage you to use this meeting to set yourselves an ambitious, yet realistic, programme of work that will allow GIABA to grow and mature as an FATF-Style Regional Body, and soon as an Associate Member of the FATF.
I wish you well for a productive meeting today. Thank you very much for your attention.
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