Successful reform of the Caribbean Financial Action Task Force

XXXV Plenary Meeting of the Caribbean Financial Action Task Force (CFATF)

20 November 2013

Freeport, Grand Bahama, Commonwealth of the Bahamas

 Dear colleagues,

It is my great pleasure to be with you here today in Freeport for the 38th Plenary meeting of CFATF. Since I arrived here on Tuesday morning I have experienced nothing but warm hospitality and I want to thank our hosts for the excellent assistance and facilities they are providing for this meeting.

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FATF-style regional bodies such as CFATF are of the utmost importance to FATF. As some of you might know, prior to taking the FATF Presidency in July of this year, I was the Chairman of Moneyval, which is the FATF-style regional body covering member countries of the Council of Europe. I am therefore fully convinced of the crucial role which FSRBs play to support the implementation of the FATF Recommendations throughout the world, and of the challenges they meet. Having a strong global AML/CFT network is of utmost importance to our work, particularly since money laundering, terrorist financing, and the financing of proliferation are transnational activities. CFATF plays a very important role in that network and you are doing excellent work to foster implementation of the FATF standards here in the Caribbean region.

Successful completion of the reform process

It hasn’t always been this way. At the CFATF Council of Ministers meeting three years ago, the then FATF President had to share his concerns about the functioning of CFATF. I will not repeat the specific issues that he raised at the time. I would simply recall that these issues posed a fundamental threat to CFATF’s place in the global network of FATF and FATF-style regional bodies.

Since 2010, you have been working on what I would call the reinvention and transformation of CFATF. At FATF we have been closely following your progress through monitoring reports and updates. The CFATF action plan counted no less than 54 items that needed to be addressed, and at the most recent FATF Plenary meeting in October 2013, FATF members agreed that CFATF had resolved all of its issues from the action plan and that no more updates to FATF were required.

Resolving the issues from the action plan is only half the story. CFATF has also made some additional institutional and organisational changes that should ensure that the reforms can last, and that should assist CFATF to successfully address future challenges.

Three years ago, my predecessor euphemistically remarked that there was a perception that CFATF did not compare as favourably as it should with other FATF-style regional bodies. At this meeting, I am able to state without a doubt that CAFTF should now be perceived as one the best in its class.

I congratulate you all for the results of the reform process. I want to thank and praise especially former Chair Attorney-General Samuel Bulgin from the Cayman Islands, former Chair Manuel Gonzalez from Venezuela, and current Chair Mr Cherno Jallow from the Virgin Islands for the leadership they have shown.

Next round of assessments

Implementation is assessed through the mutual evaluation process, and this process gives the FATF Recommendations teeth. All countries in the global network will be assessed for compliance with the revised Recommendations. Earlier this year, the FATF adopted the Methodology for assessing technical and effective compliance with the FATF Recommendations, and at the last meeting we adopted the procedures for the assessments.

While previous assessments have focused more on technical compliance with FATF Standards, now we plan to focus much more on effectiveness – does the system work? Effectiveness will make assessments more challenging because judgments will need to be made on how various components of the AML/CFT regime interact. Assessments will also now focus more explicitly on the areas of higher risk. The reports will provide a basis upon which countries can address the issues that are most critical for them.

Technical compliance is still a necessary component of any AML/CFT system, and we will also continue assessing each Recommendation in this way. Generally, the expectation is that during this round of assessments countries should have addressed their shortcomings and achieve better technical compliance ratings than last time.

ICRG Process

Some countries haven’t yet fully implemented the FATF Standards and that is a concern to FATF. Where countries need assistance to implement the FATF Recommendations, they should get help, and FATF is very supportive of the work of technical assistance providers and coordinators.

Enhanced peer pressure is another tool that FATF has at its disposal. This tool is better known as the International Co-operation Review Process or ICRG. This work is visible through the publication of the lists of jurisdictions with significant strategic deficiencies in their AML/CFT systems. We note that many countries on those lists are gradually addressing these issues. As countries exit the list, we can use our resources to focus on the remaining countries with strategic deficiencies.

The FATF should be able to take into account the work that the CFATF is undertaking to increase the level of compliance of its members through the CFATF ICRG. The CFATF ICRG is a good example for other FATF-style regional bodies to follow. Here are some reasons why:

Illicit finance is a transnational crime and any AML/CFT system is only as strong as the weakest link in the region. Through judicious use of peer pressure, the CFATF ICRG working group allows CFATF countries to assist each other to implement the FATF Recommendations. In addition, the CFATF public statement, as issued in May 2013, is a public sign of commitment of CFATF to the outside world that AML/CFT is taken seriously in this region.

We support CFATF by publishing your statements on our website, and they are an important factor in our discussions to decide what countries the FATF could target. The level of political commitment of a country to enact compliant legislation is another factor that we take into account.

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There are so many topics of interest that I could continue speaking for hours about FATF, CFATF and the work that we do. However, your agenda for today and tomorrow is packed with interesting and important topics and I should not take too much time.

I do however want to raise one last issue and that is the work that we are doing with FATF-style regional bodies. This work is carried out by the Global Network Coordination Group, the FATF working group that is co-chaired by your deputy Executive Director Dawne Spicer.

FATFs initiatives have an impact not only on members of FATF but also on members of FATF-style regional bodies. It is therefore important for all countries to participate in FATF work, either directly, or through regional working groups like the CFATF working group on FATF issues. All CFATF members can directly provide written comments on any FATF paper and they can also attend FATF meetings as part of the CFATF delegation. I noted the large number of CFATF delegates at our last meeting in October in Paris. Please continue to do so. I think it is important for all countries to have first-hand knowledge of FATF’s work.

Over the coming period, we will discuss FATF governance issues. I hope that FATF-style regional bodies will share their best practices in this regard. We will also continue our policy work on beneficial ownership, on the risk based approach, and on effective supervision. The work plan of our risk, trends and methods working group, formerly known as the typologies working group, is packed with topics that are highly relevant and interesting to CFATF members.

An important effort over the long term will be to ensure quality and consistency of assessment reports. All assessment bodies will continue undertaking assessments as we did in the third round but with an enhanced focus on ensuring the quality and consistency of reports. This important work will require extra resources from all of us.

Mr Chairman, dear colleagues, let me conclude by thanking you once again for inviting me to your meeting and for the excellent hospitality that you provide to all delegates. I look forward to seeing many of you at future FATF meetings, and to continuing the close cooperation between our two bodies.

Thank you.

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