Revision of the FATF Standards and on other objectives of the FATF’s working year 2011-2012, keynote address to APG

Giancarlo Del Bufalo’s Keynote Address to APG in Kochi, India

APG’s Annual Meeting, 18-22 July 2011, Kochi, India

co-Chaired by India and Australia

19 July 2011

APG co-Chairs, Shri Jose Cyriac and Commissioner Tony Negus

APG Executive Secretary, Mr. Gordon Hook, and APG Secretariat staff

Distinguished delegates and colleagues

Thank you very much for the invitation to be here with you.

It is an honour for me to represent the FATF at the APG’s Annual Meeting this year. I am very pleased to be here at this meeting hosted by India, which is not only a joint FATF/APG member but also the most recent FATF member. I would like to express my sincere gratitude for the warm welcome and hospitality I have received from our Indian host. My presence today wishes to show the FATF’s on-going support to the APG’s efforts in ensuring that jurisdictions in this region establish and continue working towards effective AML/CFT regimes, which is definitely not an easy task.

One of the reasons for this is that several countries in the region face capacity constraints; but the APG, with the support of several donors, has set up a strong technical assistance programme to help its members overcome this particular challenge and allow them to work towards a steady implementation of the FATF Recommendations. Another reason is that money laundering and terrorist financing are constantly evolving, which makes it necessary to strengthen and revise international standards. Therefore, the FATF is revising its Standards and the related evaluation processes; and the APG and several of its members are closely involved in this important process.

Today I would like to focus on the revision of the FATF Standards and on other objectives of the FATF’s working year 2011-2012, which is the year of my Presidency. All the FATF issues are critically dependent on a well-functioning global AML/CFT community, and it is absolutely justified to state that the APG is a very strong contributor to it.

FATF Standards and the fourth round of mutual evaluations

As to Standards, the FATF has no choice but to ensure they remain a comprehensive and up-to-date framework for combating money laundering and terrorist financing. The review of the FATF Standards this past year has made significant progress through the work of the relevant expert and working groups, and several associate members, including the APG, provided their input to this on-going process. Relevant policy goals have been discussed, including: the addition of tax crime to the list of predicate offences for money laundering; and some new initiatives such as combating corruption more effectively and addressing proliferation financing. Other important issues − such as cooperation and sharing of information among different authorities, and transparency of legal persons − are still being debated. In addition, the FATF will need to revise its current evaluation procedures and related supporting documents in order to allow for effective and consistent assessments.

It is my aim to ensure that under my Presidency the re-design of the evaluation process and the re-drafting of the relevant supporting material (such as the Assessment Methodology) will also include enhanced focus on effectiveness and will take place in close cooperation with the FATF’s associate members and the international financial institutions that perform AML/CFT assessments. I urge you as well to take advantage of this opportunity. Despite your constraints in following all aspects of the ongoing review process, I encourage you to remain informed of the outcome of these discussions and to have your national experts begin assessing the consequences that changes in the FATF Standards will have for your jurisdictions.

Looking forward to the next round of mutual evaluations, however, must not withdraw the attention from the current mutual evaluation process, including a strong follow-up process. This week, six new mutual evaluation reports will be discussed by the APG Plenary. The results of a mutual evaluation do not only show the strengths of a national system but also set out in detail the areas where a jurisdiction needs to increase its compliance with the Standards. The APG, through its Strategic Implementation Framework, is well equipped to provide excellent and tailored technical assistance to its members so as to help them address the deficiencies identified through the evaluation process.

Equally important is the continuation of the mutual evaluation process through strong follow-up procedures, which are an integral part of this process. Last year, the APG agreed on formal follow-up procedures and the first outcome of this important direction taken by the APG will also be discussed later this week. I am confident that these follow-up procedures are an important driver for jurisdictions to address the deficiencies in their AML/CFT regime and enhance the overall level of compliance with the Standards in the Asia/Pacific region. Working hard on identified weaknesses will have important benefits and will enhance all mechanisms to combat money laundering and terrorist financing and, more generally, crime.

Financial Inclusion

Over the past year, in partnership with the APG and the World Bank, the FATF has worked in close interaction with the private sector on a guidance paper that examines how financial inclusion objectives may be accommodated within the context of effective AML/CFT requirements. This guidance was also developed in response to G20 Finance Ministers and Central Bank Governor’s calls for improving access to financial services for the unbanked people, through supporting the safe and sound spread of new modes of financial service delivery capable of reaching the poor. In fact, through its associate members and international financial institutions, the FAFT often heard that its Standards are in some way an impediment to financial inclusion. Inappropriate implementation of the FATF Standards – it is true – can play a deterrent role to financial inclusion; on the other hand, a clear and precise explanation of the Standards and their exact contents can certainly support countries’ efforts to tailor their AML/CFT regimes domestically and mitigate the impact of their AML/CFT framework in terms of financial inclusion.

During my Presidency, I will support further FATF initiatives aimed at promoting its AML/CFT goals while ensuring proper consideration of financial inclusion objectives. I would like to thank the APG for its close cooperation with the FATF in this regard, and I hope the guidance paper adopted by the FATF Plenary in Mexico will be equally welcomed by this APG Plenary. I also trust the APG and its members will continue to fully contribute to this extremely important initiative.

ICRG process

I would now like to briefly touch upon the FATF’s ICRG process, certainly well known within the APG community. As you are aware, the G20 Finance Ministers and Central Bank Governors have also called for improved compliance with international standards and for the identification of jurisdictions that do not adequately co-operate in the global fight against money laundering and terrorist financing.

Since February 2010, the FATF has issued two public documents, namely: the Public Statement and the document titled “Improving Global AML/CFT Compliance: On-going Process”. The latter identifies jurisdictions with strategic AML/CFT deficiencies that have provided high-level political commitment to address their deficiencies through implementation of an action plan developed with the FATF. Currently, twelve APG members are under ICRG monitoring and follow-up. I was informed that the interaction with these jurisdictions takes place in a very open and constructive atmosphere, and I thank the concerned jurisdictions for their cooperation with the ICRG and the Asia/Pacific Regional Review Group, in particular. However, I need to urge some of these jurisdictions to take prompt measures to address the strategic deficiencies identified and thus confirm their high-level political commitment.

Finally, I would like to commend the APG for its Action Plan adopted last year to support its members under ICRG review, and I welcome the commitment of both India and Macao, China for taking on the very challenging task to co-chair the Asia/Pacific Regional Review Group.

Typologies work

The identification of new threats, vulnerabilities and ultimately risks has been one of the core functions of both the FATF and the APG since the start of their respective activities. Both organisations have already conducted substantial work to identify emerging issues and to lay sound bases for future policies and guidelines. I deeply recognise all of the APG’s efforts with regard to typologies. The joint FATF/APG Typologies meeting in 2007 proved a significant success and offered a sound basis for a similar joint venture that will take place in the Republic of Korea this December.

Global AML/CFT network

The FATF associate members, including the APG, play an essential leadership role in the implementation of the FATF Standards in their respective regions and provide expertise and important input to FATF policy-making. Further enhancing the collaboration with associate members will lead to an increase in the overall effectiveness of the global AML/CFT network. It is therefore crucial for the FATF and its associate members to recognise the good things so far attained, but we must also be ready to recognise where improvements may be needed.

The FATF is sensitive to the fact that associate members are organised differently and they should have a certain degree of institutional autonomy vis-à-vis the FATF. The fact that regional bodies with different organisational structures or constitutional frameworks are associated with the global AML/CFT network adds to its overall strength. Nevertheless, the FATF − as owner of the FATF brand − must be able to identify those parts of the global network where significant shortcomings exist that may hinder or adversely reflect on the AML/CFT effort. I am confident that the FATF can count on the support and collaboration of the APG − one of its strongest associate members − in taking this new direction with the aim to ensure strengthening of the FATF global network.

The FATF Mandate

As to the FATF Mandate: during my Presidency I will work closely with the membership to develop the proposed new FATF Ministerial mandate which we will seek to have approved in early 2012. This will ensure continuity of the FATF and its standards and reinforce our role.

Conclusion

I have widely spoken about the importance of compliance with international AML/CFT standards. The APG is certainly taking an increasing important role in this process, both through the mutual evaluation and follow-up processes and more recently in the ICRG. The FATF must rely on the APG – as well as the other associate members – to support effective implementation of the FATF Standards at a global level.

The APG has traditionally had an important voice in the FATF work as one of the older and more established FSRBs. I would therefore urge you to continue such participation and, as necessary, reinforce it. The FATF can take into account the particular challenges that APG countries face in implementing the FATF Standards only whereby these challenges are pointed out.

Lastly, I look forward to increased dialogue between the APG and the FATF on how the relationship between the FATF and its Associate Members could be further strengthened.

APG co-Chairs; APG Executive Secretary and Secretariat staff; distinguished delegates and colleagues, thank you all for your kind attention. I wish you all well for this plenary meeting and your future work.