The second Plenary of the Financial Action Task Force (FATF) led by Singapore president T. Raja Kumar recently concluded its discussions. The discussion – attended by representatives from 200+ jurisdictions of the Global Network at the FATF headquarters in Paris – addressed vast issues and challenges related to the global financial system.
This blog shares the key outcomes of the FATF Plenary held on February 24, 2023.
Key Outcomes of the FATF Plenary 2023
Below is the summary of FATF plenary key takeaways:
1. Suspension of Russian Federation Membership
The FATF considers the Russian Federation’s military invasion of Ukraine illegal, unprovoked, and unjustified and reiterated its condolences to the people of Ukraine for the suffered losses. Hence, it suspended the Russian Federation’s membership in response to the ongoing Ukraine-Russia conflict.
The FATF has also issued several statements reminding all jurisdictions to be vigilant against risks from the circumvention of measures taken against the Russian Federation to safeguard the international financial system against illicit activities linked to the ongoing Russian invasion of Ukraine.
2. Mutual Evaluations of Qatar and Indonesia
FATF adopted the mutual evaluation report of Indonesia and Qatar, observed since June 2018. FATF concluded that Indonesia has a strong legal, regulatory, and institutional framework for fighting terrorist financing. Indonesia’s anti-money laundering progress was also found to be positive but they need to focus more on larger-scale money launderers and have been asked to improve risk-based supervision of designated non-financial businesses and professions. In addition, impose effective sanctions for non-compliance.
FATF also acknowledged Qatar’s efforts in improving the anti-money laundering and countering financing for terrorism (AML/CFT) regime in recent years, which resulted in strong compliance with FATF standards. Qatar’s assessment revealed that the country is taking positive steps to understand money laundering and terrorism financing risks by supervising both financial and non-financial sectors post implementing the financial sanctions.
The assessment reports of Qatar and Indonesia will be published after completing the consistency and quality review.
3. Strategic Initiatives
FATF’s priority is to increase the transparency and beneficial ownership of legal arrangements and provide new guidance for preventing criminals and sanction evaders from concealing illicit proceeds and financial activities behind an opaque corporate structure. These illegal financial activities include legal arrangements, shell companies, and other businesses.
4. Beneficial Ownership of Legal Persons
During the FATF discussions, members agreed to tougher global beneficial ownership standards and revised Recommendation 24, which requires countries to set up competent authorities with access to adequate and accurate up-to-date information on the right owners of the companies. It also mandates countries to ensure that beneficial ownership details are held by a public body to mitigate the associated risks.
5. Beneficial Ownership of Legal Arrangements
The members of the Plenary also agreed to enhance Recommendation 25 on legal arrangements to align its requirements with those for Recommendation 24 on legal persons. This is to ensure a balanced and consistent set of FATF standards on beneficial ownership. The FATF will create a guidance document to assist countries in implementing the revised Recommendation 25 requirements.
6. Disrupting Financial Flows from Ransomware
Ransomware attacks have seen a significant global increase in recent years against individuals, businesses, and government organizations. These attacks can have a crippling impact on business activities and lead to disruptions of essential services. In response to the growing ransomware attacks, FATF recently carried out research, analyzing the methods used by criminals to perform ransomware attacks and move illicit proceeds for money laundering.
FATF also identified jurisdictions with lax or non-existent AML/CFT controls as a concern.
To combat ransomware attacks, authorities need to build and leverage existing mechanism develop necessary tools and skills by including cyber-security and data protection agencies to tackle the money laundering of ransomware payments.
7. Money Laundering and Terrorist Financing in the Art and Antiquities Markets
FATF shared a report highlighting the use of third-party intermediaries laundering illicit proceeds from corruption, drug trafficking, and other crimes by trading high-value art and antiques. Terrorists are using cultural objects in areas they are active to finance their terror operations. The report also highlights many jurisdictions that do not have sufficient awareness of the risks linked with art and antique markets. As a result, it leads to a lack of expertise and difficulties in pursuing cross-border investigations.
The report includes risk indicators for identifying suspicious activities in the art and antiques markets and best practices to identify, trace, investigate, and address the challenges. The report was published on February 27, 2023.
Counter AML/CFT Compliance Risk with Domain-Centric Approach
As criminals seek new ways to launder money and inject illegal funds from drug trafficking, human smuggling, ransomware, art and antiques, etc., into the legal financial systems, financial institutions must transform their capabilities to detect, prevent, and report such illicit suspicious activities to regulators.
With domain expertise and technology intervention, the financial service industry can strengthen its AML/CFT compliance.
Anaptyss as a strategic partner helps banks and financial institutions meet the FATF standards and challenges outlined in the latest FATF plenary. Read the complete FATF Plenary outcomes here.
Interested in more specific guidance for AML/CFT compliance?
Write to us: info@anaptyss.com.
Tasneem Abdulrahman
Manager - AML Compliance
Leave a Reply
Your email address will not be published. Required fields are marked *