Evaluating the Benefits of National Risk Assessments

Publication details




Evaluating the Benefits of National Risk Assessments

Speech by David Lewis
FATF Executive Secretary
ACAMS 12th Annual AML & Financial Crime Conference Europe

London, 25 May 2016

Thank you to Rick McDonell and ACAMS for inviting me today. It’s great to be on a panel with close friends and colleagues.

The G7 created the FATF in 1989 to tackle money laundering. Today, 198 jurisdictions have committed at the highest level to fully implement the on money laundering, terrorist financing and counter proliferation financing.

As a result, most countries now have the tools necessary to deprive criminals and terrorists of their funds.

In addition to setting the global standard, the FATF researches the criminals and terrorists use to launder and raise their funds.

FATF was also the first international body to how effective countries are at implementing global standards.

Beyond this, we review and identify countries with that pose a risk to the international financial system.

This is effective in forcing countries to take action, as it increases the costs of doing business with those countries, and deters foreign investment.

The FATF has named and shamed 58 countries. 43 of these have since made the necessary reforms.

The latest of these includes Panama, which before the Panama papers were made public, and as a result of FATF scrutiny over the last 2 years, introduced beneficial ownership requirements and regulation of lawyers, accountants and real estate agents.

Iran too are now recognizing the need to shore up and make safe their financial system, and they are re-engaging with FATF to do this.

The challenge we face today, is no longer the absence of the tools needed to do the job.

The challenge today is the effective use of those tools.

The risk-based approach underpins effective implementation. And it applies as much to policy makers in governments and to regulators as it does to banks, lawyers, accountants and other firms.

And how do you apply a risk-based approach without having done a risk assessment?

That is why in 2012, FATF put the need for countries to understand and assess their risks at the heart of the FATF Recommendations, and how we assess countries.

And I'd like to take this opportunity to dispel a myth. FATF is not a regulator, or a regulator of regulators. Only 3 of the 11 outcomes against which we assess a country’s effectiveness concern regulation.

AML/CFT is primarily about the actions governments take to prevent, detect, disrupt, investigate and prosecute money laundering and terrorist financing. Of course, regulation is an important part of that but it is only a part.

[Slide on FATF high-level objective]

This underpins our overall objective which is that financial systems and the broader economy are protected from the threats of money laundering and the financing of terrorism and proliferation, thereby strengthening financial sector integrity and contributing to safety and security.

And the outcome we are seeking and assess countries against, and that national risk assessments are intended to support, is that money laundering and terrorist financing risks are understood and, where appropriate, actions co-ordinated domestically to combat money laundering and the financing of terrorism and proliferation.

[Slide with examples of national money laundering estimates]

This is helping us to understand the nature and scale of the risks, and how that is changing. And it's not all about numbers but here are a few.

[Slide with map showing FATF Global network membership and high-risk and co-operative jurisdictions]

FATF itself helps with this assessment of risk, by identifying countries with strategic deficiencies that pose a risk to the financial system.

We publish information on risks, trends and methods, and best practice and guidance in areas such as Politically Exposed Persons, the risk-based approach for banks and money remitters, new payment products and services and virtual currencies

And crucially, our assessment of all the measures countries take to combat money laundering and terrorist financing is now underpinned by, and hangs on, a country’s ability to show FATF assessors that it understands its risks and applies a co-ordinated and risk-based approach to mitigating these risks.

[Last slide]

And in ACAMS style, here are a few take always for you.

Thank you