Advancing AML/CFT initiatives in the South and Eastern Africa region

An Address by Mr. Giancarlo Del Bufalo
President of the FATF

 

8 September 2011
11th Council of Ministers Meeting
Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)

Grand Baie, Mauritius

Introduction

Mr. Chairman, Honourable Ministers, distinguished delegates and colleagues of the Eastern and Southern Africa Anti-Money Laundering Group, good morning.

Let me first thank the Mauritian authorities for their wonderful welcome and hospitality.

I am very pleased to be able to attend the 11th Meeting of ESAAMLG Council of Ministers and to see the progress being made by ESAAMLG in advancing AML/CFT initiatives in the South and Eastern Africa region.

My predecessor, Luis Urrutia Corral, addressed the Council of Ministers last September and stressed the importance of the global AML/CFT network, to which ESAAMLG belongs as an Associate member. I wish to return to this theme as the FATF is currently working to improve the network. I also would like to say a few words on the implementation of the FATF Standards in the region. Finally, I will highlight some of the priorities for the Italian Presidency of the FATF that are of particular importance for the region: the revision of the FATF Standards and Financial Inclusion.

Global AML/CFT network

The FATF relies on a strong global AML/CFT network through which it can reach the 180 jurisdictions around the world committed to the FATF 40+9 Recommendations and processes.

For this reason, I strongly support the important role played by the FSRBs all over the world, including by ESAAMLG in Eastern and Southern Africa, in promoting the effective implementation of the FATF Standards by their membership and in providing expertise and input to FATF policy-making. The fact that FSRBs have the status of associate members in FATF recognises their important role. Today the FATF is exploring ways to further enhance its collaboration with associate members in order to increase the overall effectiveness of the global AML/CFT network. In doing so, it is crucial for the FATF and its associate members to acknowledge the good things attained so far, but we must also be ready to recognise where improvements are needed. The FATF − as owner of the FATF brand − must be able to identify those parts of the global network where shortcomings exist that may hinder or adversely reflect on the AML/CFT effort.

By granting ESAAMLG the status of Associate Member in June 2010, the FATF recognised its progress and expressed confidence in its ability to function as a mature FATF-Style Regional Body. Nevertheless some areas of the work conducted by ESAAMLG still require enhancement, such as the quality and timeliness of MERs and a good preparation of the Plenary discussions, ensuring that appropriate steps are taken in line with procedures when a country fails to demonstrate adequate progress in its Follow-up Report or the work carried out on typologies. ESAAMLG should maintain its efforts to provide the FATF with a good working environment; and it can rely on the FATF’s support in that regard.

In the broader context of improving the global AML/CFT network, I am also confident that the FATF can count on the support and collaboration of the ESAAMLG.

National Implementation of the FATF Standards

ESAAMLG plays a key role in countries implementation of the 40+9 Recommendations.

This week, the Mutual Evaluation Reports of Kenya and Lesotho have been discussed. The adoption of these reports is a milestone for ESAAMLG as it ends its first round of mutual evaluations started in 2007. Since that time, the overall quality of the reports generally has improved, which shows a better understanding of the standards. But the first round revealed a low level of implementation throughout the region, in which most countries are facing serious capacity constraints. Implementation will certainly improve in the future. Indeed the end of the first round of mutual evaluation is an important step but it should not be seen as an end point. Mutual evaluation reports provide a snapshot of a country’s AML/CFT regime, highlighting its deficiencies and evaluating its effectiveness; they are also a useful tool to identify needs for technical assistance and areas in which further work is required.

To do so, ESAAMLG has adopted a comprehensive post-mutual evaluation monitoring process, which is an integral part of the mutual evaluation exercise. It is crucial that the peer pressure and review mechanisms extend to post-evaluation stages, allowing countries to continue to exchange and to learn from each others. This week, nine countries progress reports have been presented. These reports should not be limited to a mere yearly update on recent progress; they should lead to substantial discussions, and peer group pressure when appropriate.

ESAAMLG should be flexible in considering these reports in order to take into account countries’ specificities; but it should not lose track of the ultimate objectives, namely reducing the harms caused by criminals and terrorists and preventing the financial system from being abused. Therefore, it should take all necessary measures to work with member countries so that they will achieve these objectives, and better implement the international Standards.

ICRG

The low level of implementation of the standards has resulted in some ESAAMLG members being placed in the FATF International Co operation Review Group process. The objectives are to identify countries which do not or insufficiently apply the FATF Standards and therefore pose ML and TF risks to the financial system, and to encourage greater global compliance with the international standards.

These countries are identified and their progress is closely and regularly monitored by the FATF. The results of this process are public and two documents are released in that regard after each FATF Plenary meeting: the FATF public statement and the document titled “Improving Global AML/CFT Compliance: ongoing process”. The FATF looks forward to working closely and cooperatively with the concerned countries so that a more comprehensive and effective AML/CFT system can be created and implemented.

Revision of the FATF Standards

The FATF has always ensured that the FATF Recommendations remain a comprehensive and up-to-date framework for combating money laundering and terrorist financing. The review of the FATF Standards over the last two years has made significant progress through the work of the relevant expert and working groups, and several associate members. I strongly recommend ESAAMLG members to participate, or at least be aware of this work through ESAAMLG Secretariat and provide their input, so that specific challenges faced by the region will be taken into account. Important policy goals have been discussed, and others are being identified. Following the Standards definition, the FATF will also revise its current evaluation procedures and related supporting documents in order to allow for effective and consistent assessments.

It is my aim to ensure that under my Presidency this will also include enhanced focus on effectiveness and will take place in close cooperation with the FATF’s associate members and the international financial institutions that perform AML/CFT assessments. Again I encourage you to remain informed of the outcome of these discussions and to have your national experts begin assessing the consequences that changes in the FATF Standards will have for your jurisdictions.

Financial inclusion

An adequately regulated financial system is an essential component of any effective AML/CFT regime. However, it appears that an overly cautious application of AML/CFT measures may not allow inclusion of unbanked persons. Hence, the FATF adopted, at its last Plenary meeting, a Guidance on Financial Inclusion, which examines initiatives to address financial inclusion within the AML/CFT context in developing countries, reviews the different AML/CFT aspects and for, each of them, explains how the standards can be read and interpreted so as to support financial inclusion.

Through this Guidance, the FATF acknowledges the importance of financial inclusion its complementary role to AML/CFT objectives. The FATF will keep working on financial inclusion, in particular while addressing issues such as the risk-based approach and new payment methods that have aspects related to financial inclusion. The Guidance is intended to be used as a tool by countries’ regulatory and supervisory authorities.

Therefore, I am particularly pleased of ESAAMLG’s decision, following last year’s consultation, to launch a regional project with the Alliance for Financial Inclusion aiming at promoting financial inclusion. I will certainly be interested in the progress made and results achieved in this context.

Conclusion

The FATF and the Italian Presidency look forward to working with ESAAMLG in furthering our mutual objectives. There is substantial work to be done but, with commitment, I know that we will be able to meet the challenges we are facing.

Thank you for this opportunity to speak to you today, and I wish you the best for your work.