Vienna, 7 May 2019 – The Financial Action Task Force (FATF) held its annual Private Sector Consultative Forum on 6-7 May 2019 in Vienna, Austria, hosted by the United Nations Office on Drugs and Crime (UNODC).
The meeting was chaired by the President of the FATF, Marshall Billingslea from the United States. Over 300 private sector representatives, including from the financial sector, civil society, and FATF members and observers, participated in this year’s Private Sector Consultative Forum.
The Forum is an opportunity for the FATF and its members to engage directly with the private sector on anti-money laundering and countering the financing of terrorism (AML/CFT) issues. It provides a regular platform for the FATF to learn more about the private sector’s views and concerns on these issues. Over the two days of the Forum, participants held constructive discussions over the following issues:
Key Topical Issues
Importance of AML/CFT in the Context of Combating Corruption
The FATF attaches great importance to the fight against corruption: corruption has the potential to bring catastrophic harm to economic development, and diminish respect for the law and effective governance. The session shared the experience of The Sentry and the U.S. Department of the Treasury in using a range of economic tools and sanctions against corrupt officials with a specific emphasis on the networks that they use to launder the proceeds of corruption. The session also highlighted how the work of non-profit organisations can fight against kleptocracy and complement the work of governments and the private sector in this regard. The session called upon both the public and private sectors to recognise the importance of AML/CFT in the context of combating corruption.
Latest Trends/ Priorities of AML/CFT in Public and Private Sector
In light of recent incidents of supervisory failure, major money-laundering schemes, various offshore or financial centre leaks, as well as terrorist attacks in different parts of the world, this session analysed and heard views from the public and private sector participants on the latest trends/priorities of AML/CFT. The session discussed the importance of measuring “effectiveness” in the context of implementation of AML/CFT measures and looked into areas to improve. The session also covered the current landscape of global remittance operations and the underlying risks, trends of public-private partnerships, and the importance of understanding ML/TF risks and how to mitigate risks by public and private sectors in the context of the FATF standards relating to risk.
Following the amendments of the FATF Recommendations in October 2018 to clarify the application of AML/CFT obligations to virtual asset activities and related providers, FATF had a fruitful dialogue with a multi-stakeholder group of virtual assets market players (issuers, exchangers, wallet and other service providers etc.). The discussions focused on the mapping of virtual asset services and business models, on the measures applicable to virtual asset transfers (Recommendation 16), as a follow-up to the public consultation opened in February 2019, and on the implementation of specific FATF Recommendations in a virtual asset context, in particular measures on customer due diligence (Recommendation 10), on recordkeeping (Recommendation 11) and on reporting of suspicious transactions (Recommendation 20). This input will help FATF finalise the interpretative Note to Recommendation 15 on new technologies and the Guidance paper in June 2019.
To support the responsible use of innovative technologies to further AML/CFT objectives, the FATF is developing guidance on the use of digital identity for the purposes of conducting customer due diligence (Recommendation 10). Participants discussed how the requirement to use ‘reliable and independent’ sources for identification and verification could be interpreted in the context of digital identity provided by governments or by the private sector, including the intersect with technical digital identity standards and how these could be interpreted in the context of a AML/CFT risk management framework. Private sector input highlighted the benefits and risks of digital identity, including the opportunities for greater financial inclusion, more efficient cross-border financial service provision and better detection of ML/TF activity. Pending discussions by FATF in June 2019, there will be further opportunities for private sector input on this issue.
Application of Technologies in the Context of AML/CFT (Machine Learning, Data Mining, Artificial Intelligence)
The session discussed the use of technology, its benefits and risks in order to support innovation in financial services while addressing the regulatory and supervisory opportunities posed by emerging technologies. Participants exchanged views on how public authorities and private sector firms could make greater use of technology to manage financial crime risk, how technology facilitated customer due diligence, sanctions screening and transaction monitoring, and how government authorities harnessed new technologies to increase efficiency and effectiveness in detecting ML/TF.
Opportunities and Challenges in Conducting Due Diligence (Information Sharing, Data Protection and Privacy)
Information sharing is fundamental to financial institutions’ compliance programmes, and can allow financial institutions, supervisory and law authorities to make better use of available resources and exploit new technologies and business models to develop innovative techniques to tackle ML/TF. The session discussed the key factors related to information sharing that are critical to effective risk management, including challenges faced by financial institutions related to information sharing on a global basis and within national context, public-private information sharing programs, and how to balance opportunities and challenges from the perspectives of public authorities and private sector.
Guidance and Best Practices
FATF TF Risk Assessment Guidance: Non-Profit Sector Consultation
The FATF is conducting ongoing work to develop Guidance for countries on assessing terrorist financing risk. FATF delegations met with representatives from the non-profit sector to discuss the draft Guidance, and to seek feedback on common challenges and good practices in assessing TF risk within non-profit organisations. Participants spoke about the importance of ongoing engagement with the sector, including through the use of multi-stakeholder working groups to facilitate information exchange.
Risk Based Approach on Legal Profession, Accountants and Trust and Corporate Service Providers
A risk-based approach (RBA) is central to the effective implementation of the 2012 FATF Standards. The session discussed the draft Guidance to assist competent authorities and professionals in the legal, accountancy and trust and company service providers sectors in the application of a RBA to AML/CFT. The key areas of focus were: risk assessment and mitigation, initial and ongoing customer due diligence, monitoring of clients’ activity and reporting, private sector practices for the implementation of RBA and communication of the final Guidance. Three separate but generally consistent Guidance documents are being produced and they will replace the 2008 Guidance for these professions.
Best Practices on Beneficial Ownership
The FATF has started a project to identify the best practices on beneficial ownership, which aims to facilitate jurisdictions to implement effective measures in order to ensure that legal persons are prevented from being misused for ML/TF, and that information on their beneficial ownership is available to competent authorities without undue restrictions. Participants exchanged views on the key features in different systems and shared their opinions on the key factors of an effective system to promote beneficial ownership transparency consistent with the FATF standards, including the benefits of adopting multi-pronged approach, greater use of technologies, importance of verifying information, public and private partnerships, balancing the needs of information sharing and data protection and global interaction on information sharing.