FATF -C A FL
FINANCIAL ACTION TASK FORCE ON MONEY LAUNDERING: AN ADDRESS BY PROFESSOR KADER ASMAL : PRESIDENT OF THE FATF
AT THE JOINT TASK FORCE AND COUNCIL OF MINISTERS MEETING OF THE THE EASTERN AND SOUTHERN AFRICAN ANTI-MONEY LAUNDERING GROUP (ESAAMLG)
25 August 2005
Minister of Home Affairs of Zambia
President-elect, Minister Magande
Ministers representing Esaamlg member countries
Representatives of the Cooperating and Supporting Nations (COSUNs) Distinguished guests
It is a pleasure for me to attend this joint Task Force and Council of Ministers meeting as the President of the Financial Action Task Force. It is the first time that a country from our continent holds the Presidency of the Financial Action Task Force, which is why it is a particular honour for me to address colleagues from our region. I wish also to warmly thank the Government of Zambia for its wonderful hospitality.
I would like to talk to you about the reasons why the implementation of measures to combat money laundering and terrorist financing are so important to countries in our region. I also want to inform you about the goals and aspirations of the South African presidency of the FATF and how I hope the FATF and ESAAMLG can work together to greater mutual success.
Why are the FATF standards so important?
Why have I taken on the responsibility of being FATF President for the next year? I am an old man. It is not simply because my country's President asked me to do this. I had a choice. I have been a government minister for 10 years and this experience has shown me the importance of having sufficient government resources available to improve the quality of life of our citizens. The challenge that money laundering poses to our nations is that it impacts on government's ability to deliver on its development objectives.
It is trite to say that one of the primary reasons for persons to engage in criminal activity, especially at an organised level, is to make money. However, criminals are not only interested in making money but also enjoying their criminal proceeds or reinvesting them in future criminal activity without drawing attention to the illegal sources of those proceeds. It is with this in mind that we should consider the impact of money laundering on our countries and societies.
If we don't take decisive action as governments, then continued laundering of criminal proceeds allows criminals to retain their illegal profits. This places financial power in the hands of criminals, which is then used to undermine government structures that are responsible for delivery in these areas. Secondly, no taxes are paid to governments from illegal gains. The fiscus is consequently denied monies that could be put to use in worthy socio-economic causes, such as education, healthcare and housing.
If we do not act, the vicious cycle repeats itself and a sore in our society is allowed to continue festering.
There is the related concern that it is our financial institutions that are mostly abused to facilitate this illegal gain. This raises profound questions about the integrity of financial markets. Systemic money laundering poses a threat to the legitimacy of the economies of countries.
We cannot allow the institutions of our nations to be overrun by criminals who are enabled to build strong financial power bases in our countries. In the same vein we cannot allow our territories and our institutions to be abused to facilitate the terrible attacks by terrorists we have seen all too often in recent years. Two of the worst incidents, far exceeding the death toll in recent bombings in Europe, took place in our region, unrelated to quarrels with our governments.
These are therefore the moral and social imperatives for us to implement measures to combat money laundering and terrorist financing. It is in our own security interests to do so, among other reasons.
We are lucky, in a sense, that we are not alone in this process. Countries in all regions of the world are undertaking similar exercises to protect themselves from the effects of money laundering and terrorist financing. This is where the standards of the FATF become relevant. The 40 + 9 Recommendations of the FATF set a universal standard to ensure that Governments in all parts of the world are applying equivalent mechanisms to this end.
It was therefore with a sense of enthusiastic naivety that I first read the FATF 40 Recommendations to combat money laundering and the 9 Special Recommendations against terrorist financing. I was intrigued to know what the Recommendations would reveal, what sophisticated solutions were being employed to prevent money laundering and terrorist financing.
To my pleasant surprise the Recommendations did not introduce me to a completely new language or complex concepts and solutions.
Indeed, the Recommendations set out straightforward measures to implement a number of basic and important measures:
A range of additional measures is then built upon this basis. In this way the FATF standards offer measures that are necessary to protect the integrity of a country's financial sector, to ensure that proceeds of crimes from a wide range of criminal offences including corruption, are detected and confiscated, and that criminals are prosecuted and convicted. All of these measures help reinforce the rule of law, and are important for an effective legal system, a business friendly environment and long-term economic and financial development.
Another key aspect of the FATF framework is that the implementation of these Anti-Money Laundering and Counter Terrorist Financing measures should be assessed through a peer review process, which within the broad FATF family are called Mutual Evaluations. Mutual evaluations are vital to ensure that effective AMLICFT systems are concretely implemented. Only a detailed and thorough assessment using a comprehensive methodology can assist the full development of AML/CFT systems, and allow the strengths of a county's system to be acknowledged and weaknesses to be identified, providing suggestions for future remedial action So mutual evaluations are not sanctions, but provide direction for countries and enable institutional arrangement which impact on the health of our societies.
Today more than 150 countries have committed themselves to implementing the FATF 40 + 9 Recommendations and to undergoing mutual evaluations. ESAAMLG countries are counted in this group.
I must also bring another matter to your attention. On Friday 29 July 2005, the United Nations Security Council, unanimously adopted a new resolution 1617 against AI-Qaida and the Taliban, which stated that it "strongly urges all Member States to implement the comprehensive, international standards embodied in the Financial Action Task Force's (FATF) Forty Recommendations on Money Laundering and the FATF Nine Special Recommendations on Terrorist Financing". This is a collective decision by the international community which has a bearing on all of us. It gives full endorsement and recognition of the FATF and its 40+9 Recommendations by the UN Security Council acting under chapter VII of the UN Charter. It is a major achievement for FATF, and for us in the ESAAMLG and will, I believe, undoubtedly further improve implementation of the Recommendations worldwide.
However, despite significant overall progress, there are many problems that still need to be addressed, including in the ESAAMLG region, where countries still face great challenges to build effective systems for confronting money laundering and terrorist financing, and where the mutual evaluation process is not yet strong enough.
ESAAMLG: As an effective FSRB - what is to be done?
I am sure you are aware that ESAAMLG's performance in implementing the FATF standards has come under close scrutiny. This is a matter of concern for me as the new FATF President and as a member of ESAAMLG - as it should be for all ESAAMLG members.
What can be done about this? A very positive development, in my view, has been the efforts to formulate a Strategic Plan to give direction to the activities of ESAAMLG. Such a plan will enable ESAAMLG to facilitate the development within the member countries of frameworks to deal effectively with money laundering and terrorist financing. I am particularly encouraged by the objectives in the draft Strategic Plan which entail the development of national strategies by member countries to combat money laundering and terrorist financing, and to implement measures to this end in accordance with such strategies.
The process to implement the full range of the 40 + 9 Recommendations of the FATF can be a daunting one if it is not approached with a deliberate and planned progression in mind. This implies that key objectives and milestones to be achieved along the way should be identified and progress should be monitored at various stages. The FATF is fully supportive of the approach in the Strategic Plan to achieve these objectives through a developmental approach combined with conducting evaluations.
The proposal that was formulated will enable ESAAMLG members to follow a logical sequence of first establishing the basic requirements of a system to combat money laundering and terrorist financing and then continuing to build a complete framework of measures on a sound foundation. The proposal will provide ESAAMLG members with the tools and the information to identify the areas where they need to focus their attention to develop sound systems to combat money laundering and terrorist financing.
In doing so, ESAAMLG members will also be able to establish how assistance from other partners in the fight against money laundering and terrorist financing can best help them to move from one stage in this process to the next. In this way the donor community can follow up and deliver the assistance that is required.
With the help of this exercise, I feel confident that ESAAMLG member countries will have a clear understanding of their technical assistance and training needs and that they will be able to work, with donor assistance, towards effective implementation of the FATF 40 + 9 Recommendations.
In order to achieve that goal, the FATF is also committed to continuing to provide help, as needed, to support ESAAMLG and contribute to the success of its mutual evaluation programme and to fulfilling the Technical Assistance Needs Assessments.
The FATF Secretariat is currently working with your Secretariat to organise a training course for assessors in November in South Africa. There is also an obligation on you as ESAAMLG delegates to ensure that initiatives to combat money laundering and terrorist financing are understood within your own Governments and in your own administrations and that you, delegates to ESAAMLG, ensure that the all these processes are effective in improving your national anti-money laundering and terrorist financing systems. It is only through a co-ordinated effort that the ESAAMLG member countries will be successful.
During the period of the South African presidency, I will work to ensure that ESAAMLG is viewed as an organisation committed to implementing measures to combat money laundering and terrorist financing amongst its members. I also want to make sure that ESAAMLG work is well understood by the governments in our region. I cannot do this alone; I will need your action and support.
Challenges for the South African Presidency of the FATF
Over the coming year, the South African presidency of the FATF will focus on a number of issues that may be of particular interest to countries in the ESAAMLG region. One such area is the devastating effects of money laundering linked with corruption on the effectiveness of systems to combat crime (including money laundering itself) and the ability of governments to improve the lives of their citizens. Corruption leads to the diversion of precious resources away from development and growth. Today, this issue is only partially taken into account in our assessments and it has never been really studied comprehensively, in particular with respect to its impact on developing countries and economies. Our relations with the private sector are vital for the effective implementation of FATF standards.
The overall social costs of money laundering and corruption are enormous. Corruption associated with money laundering, whether private or public, corrodes society's moral values and poses challenges to good governance practices and the legitimacy of nationhood. The FATF will work to make progress in taking into account more systematically these issues in its assessments, so that the devastating effects of corruption can be properly dealt with in AMLICFT work.
It is therefore not surprising that the Peer Group Mechanism for the evaluation of a country's financial economic and social institutions developed by NEPAD in the African Union (AU) pays a heavy emphasis on identifying machinery to combat corruption. It is not so much that the Millenium Development Goals set a standard of achievement; what is important is that Africa, through the adoption of the peer review mechanism by the African Union has adopted a principle of good governance.
Another area of study is how measures to combat money laundering and terrorist financing can be effectively applied in cash-based economies. Of particular relevance are Special Recommendation VI on alternative remittance systems and Special Recommendation IX on cash couriers. Yet another area of interest for ESAAMLG is the application of measures to combat money laundering and terrorist financing to microfinance. In exploring these, as yet untapped, areas of study we must ensure that the poor are not disadvantaged through any new standard to regulate these financing or remittance options. These issues, along with others, will be pursued during the tenure of the South African presidency.
Achieving a global network to combat money laundering and terrorist financing is a priority. To achieve this goal, the FATF wants to strengthen its partnerships with all the regional groups. To that end, the FATF plans to organise a yearly joint plenary meeting with one of the regional groups, based on the model of the meeting held recently in Singapore with the Asia Pacific Group in June 2005. My proposal to the FATF Plenary in October will be to consider a joint session with ESAAMLG in February 2006, in conjunction with the FATF.
Much hard work will have to be done by ESAAMLG before February 2006 in order to prepare itself for this session, as the spotlight of the world will be on your organisation.
The FATF under the South African Presidency looks forward to working closely with ESAAMLG.
To conclude, the main reason that ESAAMLG was established in 1999 was to facilitate the implementation of measures to combat first money laundering and then terrorist financing in its member countries. To this end all ESAAMLG members have committed themselves to following the FATF standards as the benchmark for such measures. This commitment is central to the ESAAMLG Memorandum of Understanding.
The Recommendations, when fully and effectively implemented, are an integral part of good governance, sound financial management and an important part of the fight against the criminal and terrorist activity that threatens all communities: local, national and international. We all still have some way to go to fully implement the Recommendations. I believe we should strive to work diligently with our supporting nations and organisations, to adopt the Strategic Plan and embrace processes, such as that to facilitate technical assistance., To this end mutual evaluations will remain a crucial mechanism for improving our systems. It is then that we can build upon the work we have conducted to date and demonstrate that ESAAMLG is an effective FATF-style Regional Body, able to make a meaningful contribution to the world-wide effort to combat money laundering and terrorist financing.
We shall also be able to show that we have developed an African solution to an African problem, as dealing with money laundering is not a response to external factors, but also to meet the needs of our societies.
My door will be open to all ESAAMLG members and those enjoying a cooperative relationship with you at all times. By working together, I know we can improve our organisation.
Thank you for your attention and for this opportunity to speak to you today. I wish you the best in your deliberations.