The 25th anniversary of the FATF will occur on 16 July this year. It is fitting that this should coincide with a new phase of the FATF’s work – a complete assessment of the effectiveness in how we implement the FATF standards. We think that this is the first time an international standard setter has attempted the difficult task of assessing the effectiveness of the implementation of its standards in this way. It is a significant step and perhaps a precedent for other bodies and organisations.
But the challenges, inevitable difficulties and problems we will encounter in carrying out this work need to be addressed and we will need to exercise common sense and flexibility in doing this. It is a central priority of Australia’s presidency, and I dare say ensuing presidencies, to make sure that this process operates as smoothly and efficiently as possible.
Already it is clear that resourcing this process is creating challenges. But more significant challenges confront us. I will mention only two:
We need to learn from the early assessments and be prepared to adjust our settings to address these issues. I hope to see the commencement of this work at least during the Australian presidency.
The 25th anniversary of the FATF is also an opportunity to take stock of what we have achieved, and much has been achieved. On any measure of the success of international bodies, the FATF and the FSRBs have accomplished much.
Building our relationships and understanding of the FATF with the private sector is really critical. Our work is getting increased publicity [for example, the recent article in The economist on issues related to de-risking]. But also there is a focus on the real motives and sanctions for non-compliance and how this has to do ultimately with market forces - how the financial markets and the ratings agencies view the risk of doing business with certain countries or companies/organisations. Increasingly the products of the FATF will need to be attuned and better understood by the private sector.
One of the priorities of the Australian presidency is to utilise the opportunity of the 25th anniversary and the commencement of the fourth round of evaluations to deepen the understanding and input of the private sector.
This is also true of international bodies. We need to continue to deepen our relationships with the UN, G20, IMF and World Bank. It is worth singling out our relationship with the Egmont Group of Financial Intelligence Units, a very close and symbiotic relationship given the role of FIUs. I would like to see an opportunity for the Egmont Group to present at plenary meetings of the FATF. I would hope that this would give us an important perspective on the practical implications of our policy.
I also want to mention the G20 which Australia is also hosting the presidency of this year, particularly the G20 Anti-Corruption Working Group chaired by Italy and Australia. The FATF has specifically worked closely with this group to address the importance of beneficial ownership and customer due diligence in both the context of corruption and money laundering.
Threats to the international financial system
Finally, let me turn to the other part of our core business – keeping abreast of changes and developments in threats to the international financial system. We need to ensure that our policies remain relevant, and that we continue to provide leadership and some measure of international consistency in approaching new products and risks.
There are two main priority areas for the Australian presidency in this regard:
In relation to structure and organisation of FATF itself, there are a number of initiatives commenced under the Norwegian presidency, continued by the Russian presidency, which need to be finalised. Prioritisation of work is a critical area, particularly now that we have commenced the fourth round of evaluations. There are also some internal governance issues that we need to deal with. These are important initiatives and I hope that they can come to fruition under the Australian presidency, so that the FATF can continue the important work that it does to protect the integrity of the international financial system.