The Financial Action Task Force (FATF) organised and hosted an Experts Meeting on Corruption on Sunday 27 February 2011. The meeting was chaired by the President of the FATF, Mr. Luis Urrutia Corral (Mexico), and 103 delegates from 26 jurisdictions and 18 international bodies participated . The FATF attaches great importance to the fight against corruption, and supporting anti-corruption efforts is a key priority of the Mexican FATF Presidency.
This FATF experts meeting was the first international platform for exchanging views between operational-level anti-money laundering experts and anti-corruption experts, policy makers from both developing and developed countries, and international standard setters and assessment/monitoring bodies*. The key objectives for this meeting were:
- To gather information from operational anti-corruption experts and assessment bodies on how effectively anti-money laundering (AML)/counter-terrorist financing (CFT) measures are working to assist in the fight against corruption.
- To have a preliminary discussion of the policy implications of these issues, including how the synergies between AML/CFT measures and anti-corruption (AC) efforts might be further enhanced.
- To use the results of these discussions as input into FATF’s and anti-corruption standard setters’ ongoing and future work on corruption.
Experts discussed the following issues, based on presentations by delegates: i) the intersection of AML/CFT and AC measures; ii) preventive measures; iii) prosecution issues; iv) asset recovery; and v) mutual legal assistance. Participants made the following general observations, some of which raise issues which fall within the scope of the FATF mandate, while others fall within the scope of the mandate of other international bodies.
Intersection of AML/AC measures 1
AML/CFT and AC regimes often operate in isolation at both the policy and operational level. However, AML/CFT tools are one of a range of tools which can be used to prevent corruption and bribery from taking place, investigate and prosecute such activity, trace assets, and provide related international cooperation. The international community can assist by continuing this dialogue and supporting events, such as this one, which are aimed at breaking down the silos which currently exist in many countries. Strengthening the links between AML/CFT and AC efforts creates a win-win situation.
There is a general need to increase awareness of how AML/CFT tools can be effectively used in the fight against corruption. Broad dissemination of awareness raising tools, such as the FATF Corruption Information Note, is useful steps in that regard.
The essential elements of an effective AML/CFT system, which can usefully be leveraged to combat corruption, are a robust legal framework, sufficient institutional capacity, effective implementation, and the political will to pursue these objectives. The FATF is working, on an ongoing basis, to identify high risk jurisdictions which have not sufficiently implemented AML measures and/or lack the political will to do so, and encourage them to improve implementation of AML/CFT measures.
Enhancing the understanding, in both the public and private sector, of the genuine benefits that AML/CFT measures bring to the fight against corruption is an important objective which can be furthered by compiling relevant information, data and anecdotes. The FATF is currently undertaking a typologies study on corruption, the results of which will be fed into the ongoing work to develop guidance on Recommendation 6 and other relevant FATF work.
FATF’s unique assessment process has proven its effectiveness in the area of AML/CFT, and the FATF Presidency would encourage the development of similar processes in other international organisations. However, the current FATF assessment process does not focus sufficiently on effectiveness. The FATF is currently considering how to ensure that assessing effectiveness is an integral part of the assessment process going forward. Part of that discussion will involve consideration of how issues such as corruption might impact the implementation of AML/CFT measures.
It has been observed that corruption: (a) constitutes one of the most significant sources of illegal proceeds; (b) inhibits growth, the resolution of financial crises, and the implementation of AML/CFT regimes; and (c) costs some countries a significant amount of their GDP. The area of grand corruption presents large challenges because corruption is almost legalised in such cases and there is a pattern of complicity. The donor community, beyond the FATF, requesting jurisdictions, and the FSRBs need to constructively engage on these issues, with a view to encouraging the development of national, regional and global strategies, and providing targeted training and technical assistance.
Preventive measures are at the heart of detecting corruption and money laundering. However, many jurisdictions have not implemented effective systems to identify persons with prominent functions who may be engaging in corrupt activities, and take appropriate action in such cases. The FATF is currently working to strengthen the standards on Recommendation 6 (which focuses on politically exposed persons, in a broad context which goes beyond corruption), and to develop guidance on how to better implement these requirements.
Transparency of transactions and asset ownership is essential to enable the tracing of assets related to corruption, asset recovery, and the investigation and prosecution of corrupt activities. It was also noted that expectations may sometimes be different in the AML/CFT and AC contexts concerning the underlying rationales of transparency and beneficial ownership requirements. The FATF is currently undertaking a review of its standards, with a view to strengthening the standards relating to transparency and beneficial ownership (Recommendations 5, 33 and 34). Ongoing FATF work also impacts related requirements applicable to designated non-financial businesses and professions (Recommendation 12). In taking these issues forward, the FATF recognises the importance of engaging with the private sector.
There is a clear synergy in the prosecution and enforcement of ML and corruption offences. It is important to recognise that the prosecution of ML cases can be useful tool for prosecution of corruption cases as well. Prosecutors need to think more creatively on the synergies between ML and corruption offences, and how they can best be utilised.
Active investigation and enforcement of money laundering and corruption offences is crucial. The FATF is currently undertaking work to further strengthen its requirements on Recommendations 26, 27, 28 and 30, which relate to investigative and prosecutorial capacity, resources, and public sector integrity.
Sometimes obstacles to prosecuting ML in one country are created by how prosecutions of related offences are handled in another country. To avoid such problems, it is crucial to have effective and sustainable international co-operation and information exchange. FATF is currently undertaking work to enhance its assessment processes, including in the area of international co-operation.
Asset recovery is a key requirement of the United Nations Convention against Corruption (UNCAC), which highlights the importance for countries to ratify and implement the UNCAC. Stolen assets are difficult to trace and, even where they have been found, it is often difficult to establish sufficient capacity in the requesting and requested countries to facilitate asset recovery. Prosecutors need to think creatively concerning what sorts information might be used to support asset recovery actions. For instance, economic analysis conducted by the international financial institutions can be useful. Another key challenge is obtaining actionable information to take action in relation to asset recovery and related ML cases, which highlights the need to develop good working relationships with foreign counterparts, and consider how legal systems can be enhanced to better facilitate the exchange of information. In February 2010, the FATF issued a Best Practices Paper on Confiscation, which highlighted some of the challenges that the international community faces in this area.
Mutual legal assistance
Developing effective mechanisms for sharing such information is proving to be challenging for some countries. It is recognised that many agencies, particularly in developing countries, have a low level of capacity in establishing effective mechanisms to facilitate international co-operation and information exchange. The FATF standards aim at having public agencies well staffed and resources, with sufficient capacity to respond to international requests in a timely manner. The FATF has also issued guidance on Capacity Building for Mutual Evaluations and Implementation of the FATF Standards within Low Capacity Countries which prioritises implementation of international co-operation mechanisms.
The FATF standards require jurisdictions to collect and maintain statistics on: i) the number of mutual legal assistance (MLA) and extradition requests made/received, including the nature of the request, whether it was granted or refused, and the time required to respond; and ii) the number of other formal requests for assistance made/received by the FIU, including whether it was granted or refused; and iii) the number of spontaneous referrals made by the FIU to foreign authorities. Nevertheless, it is often difficult to assess the effectiveness of MLA and international co-operation mechanisms since many countries do not maintain sufficient statistics in this area. As part of its ongoing work on assessing effectiveness in the context of the mutual evaluation process, the FATF is considering how to measure the effectiveness of mutual legal assistance and extradition procedures, and agency to agency co-operation (Recommendations 35-40).
27 February 2011
1. This summary refers to the FATF Recommendations as published in The 40 Recommendations, published October 2004.
* The FATF is particularly grateful to StAR for providing assistance to enable some of the participants to attend this meeting.
List of jurisdictions represented:
List of international bodies represented:
Hong Kong, China
Kingdom of the Netherlands
Kingdom of Saudi Arabia
Financial Action Task Force (FATF)
Asia Pacific Group (APG)
Caribbean Financial Action Task Force (CFATF)
Council of Europe
Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL)
European Anti-Corruption Network (EACN)
European Partners Against Corruption (EPAC)
Financial Action Task Force of South America (GAFISUD)
G20 Anti-Corruption Working Group
Intergovernmental Action Group against Money Laundering in Africa (GIABA)
International Anti-Corruption Academy (IACA)
International Monetary Fund (IMF)
Organisation for Economic Co-operation and Development (OECD)
Organisation for Security and Cooperation in Europe (OSCE)
United Nations Office on Drugs and Crime (UNODC)
World Customs Organization (WCO)
List of presenters:
FATF President; FATF Secretariat; G20 Anti-Corruption Working Group Co-Chair
Intersection of AML/CFT and AC measures:
World Bank; Brazil
Singapore; France; UNODC
Haiti; Switzerland; StAR experts
Mutual legal assistance: