Commitment to improve AML/CFT in the MENA region

18th Middle East and North Africa Financial Action Task Force (MENAFATF) Plenary Meeting
Kingdom of Bahrain

26 November 2013

Your Excellency, President of MENAFATF, Mr. Esam Eddine Abdul Gadir Al Zain;

Distinguished delegates and colleagues,

It is a great pleasure for me to be speaking again to the Plenary.   Before I begin, I want to thank you for the warm hospitality I have received, and to thank the Secretariat for arranging this meeting.

As you will remember, I attended the 16^th Plenary of MENAFATF in Morocco a year ago, as vice-President of the FATF.  I am very pleased to have the opportunity to return this year as FATF President, and to see at first hand how MENAFATF – and its important work – is progressing.

FATF-style regional bodies such as MENAFATF are of the utmost importance to FATF. As some of you might know, prior to taking the FATF Presidency in July of this year, I was the Chairman of Moneyval, which is the FATF-style regional body covering member countries of the Council of Europe. I am therefore fully convinced of the crucial role which FSRBs play to support the implementation of the FATF Recommendations throughout the world, and of the challenges they meet. Having a strong global AML/CFT network is of utmost importance to our work, and MENAFATF plays a very important role in that network and you are doing excellent work to foster implementation of the FATF standards in the region. The joint FATF-MENAFATF typologies event next week will further highlight this work.

In the FATF, and in all the regional bodies which together make up our global family, this is a period of change.  The last round of evaluations was in most cases completed a year or more ago.  And we have taken the opportunity this offered, to make a wholesale revision of the FATF standards and our approach to assessments.

• In February 2012 we published the revised FATF Recommendations and Interpretive Notes, which updated and strengthened the standards in critical areas like risk assessment, beneficial ownership, and international cooperation.
• In February this year we published the revised Methodology for assessing compliance with the FATF Recommendations, which for the first time introduces a rigorous and comprehensive tool for assessing the effectiveness of national  AML/CFT systems.
• In October this year the FATF published the revised procedures for conducting mutual evaluations, which have additional elements designed to make sure our assessments focus on the most important risks to each country, and to improve the quality and consistency of FATF evaluation reports.
• At the next FATF Plenary, we will consider the consolidated processes and procedures which will apply to all the assessment bodies in the Global Network – including MENAFATF. In particular, we will look at the issue of how to ensure all the assessment bodies produce consistent and high-quality evaluations.

The next round of FATF evaluations is just beginning – with the FATF due to consider the first reports of our Fourth Round when we meet next October.  And the next round of MENAFATF evaluations will begin soon. 

So before we begin this Plenary meeting, I want to say a few words about the changes we have made, and the further challenges ahead.  

Effectiveness and Risk

All countries in the global network will be assessed for their compliance with the revised FATF Recommendations.  Through the Mutual Evaluation process we give force to the FATF Recommendations, and improve global measures to combat crime and terrorism.

While previous assessments have focused more on technical compliance with FATF Standards, applying the standards in a uniform way, the new methodology is different.  In future, we will focus much more on effectiveness and on the risks – how the system works. And whether  it focuses on the most important issues.

Effectiveness will make assessments more challenging because judgments will need to be made on how various components of the AML/CFT regime interact. Reports will provide a basis upon which countries can address the issues that are most critical for them.

Technical compliance is still a necessary component of any AML/CFT system, and we will also continue assessing each Recommendation in this way. Generally, the expectation is that during this round of assessments countries should have addressed their shortcomings and achieve better technical compliance ratings than last time.

In the FATF, our member countries are already preparing to be assessed under this new approach – ensuring they have a national risk assessment, and that they are using it as a basis for their policies and their strategic decisions. They are also collecting and recording the information that they will need to demonstrate that they are effective – the statistics and case studies which show how they are dealing with the money laundering and terrorist financing risks.

MENAFATF’s next round of assessments will use the same new approach as the FATF, so it is important that MENAFATF member countries also prepare to be assessed with this new approach – by considering their understanding of the risks, and by ensuring they have evidence to show their effectiveness.

Follow-up

The most important goal of mutual evaluations is to make improvements in national systems for combating money laundering and terrorist financing.  So the mutual evaluation report is not the end of the process. It is essential that there is rigorous and long-term follow-up, to make sure countries do make changes, and to provide the help, support, advice, and sometimes pressure; that will enable them to make changes to their national systems.

When I attended the MENAFATF meeting in Morocco, I was pleased to see your clear commitment to a rigorous follow-up process, with clear expectations of how countries will improve, and a clear rules-based process for ensuring countries do make adequate progress to address their problems. 

Since then, I have followed with interest the discussions of the FATF’s Global Network Coordination Group, which was concerned that MENAFATF’s follow-up procedures were not being applied in practice. I understand that it is always difficult to put a new system into effect, and I was relieved  to hear about how MENAFATF is going to apply consistent and rules-based arrangements for follow-up.  I will look forward to seeing your discussion of follow-up during this week. 

ICRG Process

Some countries haven’t yet fully implemented the FATF Standards and that is a concern to FATF. Where countries need assistance to implement the FATF Recommendations, they should get help, and FATF is very supportive of the work of technical assistance providers and coordinators.

Enhanced peer pressure is another tool that FATF has at its disposal. This tool is better known as the International Co-operation Review Process or ICRG. This work is visible through the publication of the lists of jurisdictions with significant strategic deficiencies in their AML/CFT systems. We note that many countries on those lists are gradually addressing these issues. As countries exit the list, they should be congratulated. We can use our resources to focus on the remaining countries with strategic deficiencies.

Mr. President, distinguished delegates, time is always short at a Plenary meeting, and we have a great deal to discuss.  I thank you for giving me the opportunity to address you today. I wish you all well for the remainder of this Plenary meeting and in your important work.

Thank you for your attention.