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Outcomes from the meeting of the FATF Plenary, Paris, 25-27 June 2014

Paris, 27 June 2014 - Under the Russian Presidency, the third FATF Plenary meeting of FATF-XXV was held on 25-27 June 2014. The main issues dealt with by this Plenary were:

End of third round follow-up for Argentina, Australia, Germany and Korea

The FATF has approved and published the follow-up reports to the mutual evaluations of Argentina, Germany and Korea. Germany and Korea were placed in the follow-up process as a result of partially compliant and non-compliant ratings for certain core and key Recommendations in their mutual evaluation reports. Both countries have since taken sufficient action to address these deficiencies and have therefore been taken off the follow-up process.

The FATF heard updates on the actions taken by Argentina to strengthen its AML/CFT measures. Argentina was submitted to the follow-up process since the adoption of its mutual evaluation report in 2010. Argentina has made sufficient progress in implementing the technical requirements of the Core and Key Recommendations and has been removed from the follow-up process. Since June 2011, Argentina was also identified as a country with strategic AML/CFT deficiencies by the FATF International Co-operation Review Group process. Argentina has substantially addressed, on a technical level, the action plan agreed to with the FATF as part of the ICRG process. As required by the procedures for exit from the ICRG process, the FATF will conduct an on-site visit to confirm that the process of implementing the necessary reforms and actions is underway to address deficiencies previously identified by the FATF.

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The FATF also heard an update on the actions taken by Australia. Australia has now taken sufficient steps to address the deficiencies identified in the Core and Key Recommendations and is removed from the follow-up process. In particular, Australia issued revised AML/CTF rules which commenced on 1 June 2014 and enhanced customer due diligence requirements. The FATF has already begun Australia’s 4th round mutual evaluation, which will examine the full AML/CFT system and which will be presented to the FATF Plenary in February 2015.

Update on AML/CFT Improvements

The FATF congratulates Kenya, Kyrgyzstan, Mongolia, Nepal and Tanzania, for the significant progress made in addressing the strategic AML/CFT deficiencies identified in their mutual evaluation reports and the action plans agreed with the FATF. These countries will no longer be subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. These countries will work with their respective FSRBs as they continue to address the full range of AML/CFT deficiencies identified in their Mutual Evaluation Reports.

Reviewing voluntary tax compliance programmes in several jurisdictions

The FATF heard reports on the voluntary tax compliance (VTC) programmes of Argentina, Australia, Kyrgyzstan and Pakistan. On the programme of Argentina, which had been found consistent with the FATF’s four basic principles on the VTC,[1] no suspicious transactions were detected. The programmes of Australia, Kyrgyzstan and Pakistan were found to be compliant with the four basic principles. As for the members of the FSRBs, MONEYVAL provided an update of their monitoring results on the programmes of Albania, Hungary and Malta.

The FATF adopted new procedures for dealing with VTC programmes with further clarity in terms of monitoring VTCs of member jurisdictions of FSRBs, and urges any country which introduces a VTC programme to apply all AML/CFT measures to such a programme.

Virtual Currencies: Key Definitions and Potential AML/CFT Risks.

The FATF conducted research on virtual currencies. From this research, the FATF has made a preliminary assessment of the associated ML/TF risks. An important step in assessing the risks and ultimately in determining an appropriate response is to have a clear understanding of the types of virtual currencies and how they are controlled and used. This report establishes a set of key definitions and forms a basis for further policy development

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Risk of Terrorist Financing Abuse of the Non-Profit Sector

Terrorist organisations need funds, material, personnel and public influence to carry out their illegal activities. Non-profit organisations (NPOs) have similar needs to further their legitimate and good causes. The high level of public trust in the good work done by NPOs, their large transitory workforce and the global networks they have created, are some of the factors that make NPOs attractive and vulnerable for abuse by terrorists and terrorist organisations. This typologies report examines in detail, how and where NPOs are at risk of terrorist abuse and provides a number of red flag indicators to help all stakeholders identify and investigate possible cases of abuse.

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Financial flows linked to the production and trafficking of Afghan opiates 

Despite international efforts, the cultivation of opium poppies in Afghanistan continues; the world leader in the production and trafficking of opiates. The trade even increased significantly in southern parts of the country, generating revenues as high as USD 70 billion. This report aims to raise awareness about the financial flows related to the Afghan opiate trade and the interrelationship between drug trafficking and terrorist financing. It analyses how the financial transactions related to the Afghan opiates trade are conducted which will assist in the detection of opiate-related financial transactions. It also provides financial centres with information about the factors that make them attractive and vulnerable to financial transactions involving proceeds of drug trade. 

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Expansion of membership

The FATF has agreed to expand its membership. It has begun a process to determine the readiness of candidate countries.

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[1] The FATF’s four principles on the VTC: (i) the effective application of AML/CFT measures during the implementation of VTC programmes; (ii) the prohibitions on exempting VTC programmes from AML/CFT requirements in the FATF Recommendations; (iii) domestic co-ordination and co-operation between relevant competent authorities; and (iv) international co-operation, i.e. mutual legal assistance.