FATF President speaks at annual Israel Money Laundering and Terror Financing Prohibition Authority IMPA Conference

1 December 2020

As delivered

Minister of Justice Nissenkorn, Attorney General Mandelblit, Director General Yaakobi, Director of IMPA – Shlomit, Distinguished guests,

Thank you for inviting me to speak today. It is great to be here to mark the 20^th anniversary of the Israeli Anti-Money Laundering Law. I would like to take the opportunity to note the valuable contribution of the Israeli delegation to the Financial Action Task Force. This month, also marks the second anniversary of Israel’s membership to the FATF. I would like to thank the FATF delegation for its dedication and commitment to the important work we do.

As one of the FATF’s 39 members, Israel is part of a coalition that is crucial in the fight against organised crime and terrorism. The FATF has three core functions: we research how money is laundered and terrorism is funded; we set global standards and issue best practice to help countries mitigate those risks; and assess the effectiveness of actions countries take – to see if they are achieving real results.

We work in close collaboration with nine regional bodies; and with international partners such as the G20, the UN and IMF. Our standards are promoted across a network of more than 200 jurisdictions. And if a country’s financial system is assessed to have serious problems, we publicly identify them on what is often referred to as our grey and black lists. 

I became FATF President in July this year. At the beginning of my two-year term, I pledged to strengthen the FATF’s governance, enhance its strategic focus, increase its public visibility and reinforce its fight against financial crime.

Under my presidency, the FATF is working to tackle some of the most pressing challenges we face. This includes work on ethnically or racially motivated terrorism fuelled by far-right ideology; migrant smuggling and environmental crime; illicit arms trafficking; and work on the potential of new technologies to improve the speed and effectiveness of systems to detect illicit activity.

Digital transformation is one of the most significant topics that the FATF will focus on in the coming years. The initiative will be based on previous work undertaken by the Working Groups. This includes a workshop with FinTech firms that took place on the margins of the previous Joint Experts’ Meeting in Tel-Aviv, which I had the pleasure of attending. It also builds on our work on digital ID and virtual assets.

The Israeli delegation to the FATF is a notable and active contributor to our work and I know will be to projects in the future.

The FATF’s work is varied, but all of it is important. All of our projects reflect our core mission – to tackle money laundering and terrorist financing. Money laundering erodes trust in banks, governments and authorities. It hampers fair competition. And it undermines efforts for strong, balanced, inclusive economic growth.

If you prosecute money laundering, it means you can convict tax evaders. You can put corrupt officials in jail. It means you can build a safer and fairer society. It is an important fight. But so far, our collective efforts have not been good enough.

We are seeing the impact of this during the COVID-19 pandemic. The pandemic has had a profound effect on all of us. Of course, governments are now focused on managing the health crisis and supporting their economies. But criminals are taking advantage of the situation. Financial fraud, embezzlement, exploitation scams, counterfeit medicines, fraudulent investment opportunities, phishing schemes… the list goes on.

The pandemic has severely impacted the ability of some governments and the private sector to take measures to detect, prevent and investigate money laundering and terrorist financing. We asked over 200 members of our Global Network about the situation: more than half of the responses reported an impact on their government’s ability to tackle this sort of activity.

The FATF’s risk-based standards can help ensure that the public and private sectors carry out appropriate levels of due diligence. This reduces the risks of falling victim to financial crime. Even during these challenging times, the effective implementation of FATF standards must remain high up the global agenda. 

All countries need to effectively implement the FATF standards, particularly FATF members – who should lead by example. Each country must assess the risks they face. But, in general, it means prioritising investment in law enforcement specialising in financial crime. It means knowing who owns and controls shell companies. And it means effectively regulating the non-financial sector, such as lawyers, accountants and real estate agents.

In May this year, the FATF published a report on the risks and policy responses to COVID-19. This continues to be relevant and is currently being updated. Relevant authorities in many countries have also published work on the subject, focusing on domestic or regional risks and responses. I commend the Israeli FIU for recently publishing such a report as well.

These difficult times have also ushered in some important perspectives on technologies. During the pandemic, new technologies have served the private sector – such as the use of digital ID to enable non-face-to-face interaction with customers. Other digital solutions support information sharing, and the detection and analysis of suspicious activities.

Speaking of digital matters… In June last year, the FATF created the first global standards for the cryptocurrency industry. However, to date, only 25 of the FATF’s 39 members have transposed the revised FATF Standards into their domestic frameworks. Due to the global nature of virtual assets, it is crucial that all countries make the necessary changes.

To help our private sector partners, the FATF recently released a report on Red Flag Indicators for Virtual Assets. This report gives an overview of the common suspicious activity to look out for.

As the virtual asset sector changes rapidly, the FATF will closely monitor developments and emerging risks. This include monitoring so-called stablecoins. Their potential for anonymity and global reach present a money laundering and terrorist financing risk. Last month, the FATF submitted a report to the G20 Finance Ministers and Central Bank Governors. It states that our standards clearly apply to stablecoins. This means that any business using them will have to observe the relevant anti-money laundering rules.

We are gathered here today to celebrate the 20^th anniversary of Israel’s adoption of the law that prohibits money laundering. This is a special occasion and it merits a special acknowledgement, so let me raise my glass and offer a hearty Mazel Tov to the people and government of Israel. Enactment of this law laid the foundation for Israel’s follow-on anti-money laundering measures that have contributed to making Israel a bulwark in our global coalition. I offer thanks again to Israel’s delegation to the FATF for their commitment and continuing efforts to combat money laundering and terrorism financing.

Israel became a member of the FATF exactly two years ago, following a long qualification process that culminated in the adoption of the Mutual Evaluation Report by the FATF and Moneyval. Only a handful of countries have been invited in recent years to join the ranks of the FATF. We are happy to see that Israel is clearly showing its commitment to taking a prominent role to tackle the major issues we deal with.

Israel’s fight against money laundering has undergone a paradigm shift during the past 20 years. Through hard work and dedication, Israel has gone from the FATF’s ‘black list’ to having one of the strongest mutual evaluations, and membership of the FATF.

I also want to note: Israel has hosted the Joint Experts Meeting in Tel-Aviv; nominated  Dr. Shlomit Wagman to co-chair the operational Risks, Trends and Methods Group; and continues to participate in various projects and work-streams... including, most recently, Dr. Wagman, attending the FATF Steering Group meetings as a guest at my invitation.

Every country has issues. But despite the many challenges we face, I feel confident that our commitment, co-operation and determination will make a difference. Together we can combat illicit finance and take the profits away from the criminals. By working together, we can and will make societies a safer and fairer place for all.