This Week in AML
The presidency of the Financial Action Task Force has recently transferred to Singapore and the new president has issued the organizational priorities for the next two years. John and Elliot discuss the work of FATF and the priorities and how they integrate with activity going on throughout the financial crime prevention community.
FATF Priorities for 2022-2024 TRANSCRIPT
Elliot Berman: Hi, John, how are you today?
John Byrne: Hi, Elliot, over COVID. So I'm back at almost full strength and, obviously, even though double boosted and double vaxxed, as we all know, you're still susceptible. So happy to be over that. And, for folks that are dealing with it, I would suggest. Then, if you can get it, the Paxlovid prescription really helps sort of push it through. So, it seemed to work pretty well for me. So, happy to be back on my feet.
Elliot Berman: Yeah, glad to hear you are feeling better. You definitely sound. Yeah, your voice sounds better than last week and the other conversations you and I have had in the interim. So, glad to hear that. So this week, I thought it made sense for us to talk about the priorities that the new FATF president has issued as the plan. But, before we talk about that, we probably should let people know what FATF is, what they do, and all that stuff. So why don't you just bring our listeners up to speed?
John Byrne: Sure. So, the financial action task force was created back in 1989, and it's a global organization, so it's intergovernmental. So it's populated by government representatives, not political office holders, but governmental staff and, you know, international standards that deal with money laundering, terror financing, those sorts of issues. They develop a series of recommendations, and that's how the standards are crafted, how each jurisdiction deals with the various recommendations, which get updated from time to time, depending on particular issues that you know they've added over time.
Human trafficking, obviously during the pandemic, the frauds that come out of that. And one way that they assess compliance, if you will, with the standards is they do what they call mutual evaluations. So a team of experts made up of the members of FATF from other countries will meet. And look at the potential effectiveness of the laws and regulations of each jurisdiction and give you sort of a score or grade, if you will. So this has worked really well. I'd say not fairly well, really well over time. Now they measure effectiveness, not just whether you have these laws and regs in place.
And the president of FATF is now in that office for two years, and it used to be one. So the first time was the German presidency that just ended. So now the presidency is from Singapore. So for the next two years, the president of Singapore helps sort of lead themes and strategies. And I wrote a blog about this at the plenary when that handoff occurred.
They give you sort of broad-based objectives. And then, toward the end of that same month, they list more specifics. And then, the incoming president is T. Raja Kumar from Singapore. And he just, on July 1st, issued a series of objectives which we will talk about, which means in the next two years, that's sort of in addition to recommendations and evaluations. These are sort of the focal points of FATF in terms of information sharing and meetings and reports that you'll see over the course of the next 24 months.
Elliot Berman: Yeah. So, I think the transfer for change from one year to a two-year presidency is significant because it really does give each. That makes the cycles longer, and these kinds of strategic, focus items, a chance to really get woven into the day-to-day work of FATF and the participating countries. So, I noticed that the first of the goals for this presidency relates to what's called strengthening asset recovery, and it's really focusing on the pervasiveness of things like financial crime and the lack of recovery of illicit financial flows. So there's an estimate that less than 1% of illicit financial flows are actually interdicted and recovered.
John Byrne: Right. And FATF, according to the president, will work on this.
In conjunction with other groups including Interpol and others. And they'll convene a global round table on this. A quick aside, in the class that I teach on money laundering, terrorism, and corruption, I'm going to have the US expert on asset forfeiture speak to the class in a couple of weeks.
And I'm going to try to also ask him to sit down for a conversation on asset forfeiture, cuz it is a big tool obviously, and this is obviously a focal point for the Singapore presidency, but it's also, in the US, a place in which funding can help drive a lot of changes as well.
Elliot Berman: Yes. I think that the theme that as we talk about some of these other goals as well, the consistent theme, and really the underpinnings of FATF its existence really is collaboration and cooperation. So, rather than try as an organization itself, it really uses its gravitas because it's made up of intergovernmental connections. To use other inter-governmental connections to really make some of these things happen. As you just mentioned.
John Byrne: Right. Then the second category is countering illicit finance of cyber-enabled crime, which is obviously an ongoing challenge for FATF and all the jurisdictions. And the Singapore president indicates that they're gonna start a new initiative to focus on money laundering and terrorist financing. That's linked to cyber-enabled fraud. And they want to try to figure out the various techniques that occur and what sort of tools, data analytics working with various industries and try to figure out a way to help the membership deal with attacking cybercrime. So obviously, other organizations do this as well, but having FATF engaged in this makes a lot of sense.
Elliot Berman: Yes. The next one is increasing the effectiveness of global AML measures. And this one, again, sharing best practices, and they have been working. The FATF staff has been working on guidance on beneficial ownership information, which they want to complete, which we understand, you know, has been a highlight issue. In the financial crime prevention community for a number of years now and different countries have gone at it differently. You know, there's a requirement in AMLA for the US to spin up some kind of a registry. We haven't seen the regs yet. This pillar also includes the adoption of data analytics. Which means they'll need to be sharing data so they can do the analytics.
John Byrne: Yeah. They also continue to talk about beneficial ownership. Right? So, completion of the guidance on that, which we're dealing with in the US, which obviously is a global concern. And that's obviously a specific FATF recommendation on beneficial ownership information for trust and other legal arrangements.
So that's something that we'll see here right away, as well as internationally in some of the other jurisdictions. Either as a response to what FATF is doing or ongoing, you know, activity that probably is being done to improve the evaluations that FATF engages in to make sure the countries are properly dealing with this information gathering. That's so important to dealing with shell companies and those sorts of things.
Elliot Berman: Yeah. It'll be interesting to see if, over the next number of years, and I think it will be years whether FATF starts to push for some kind of a global registry or a global exchange of the registries. Again, they're at the country level at the moment. To the extent that a country has a global, country-level registry, each country's going in its own direction.
There are certainly similarities, but they're not identical. And it'll be interesting to see if FATF tries to push toward a global standard that would allow the data sets to at least be combined if not become a global registry.
John Byrne: Right. So we'll keep track of these priorities. And obviously, there'll be other things that will be issued. The next plenary, I believe, is in October, but there'll be other programs. FATF has a lot of good information on its website. They also do webinars that are free, and they have public consultations on various issues. So you can weigh in, even if you're not a government representative. So I've always felt over the course of my career. And I know you feel the same way, Elliot. FATF produces a lot of really good information that could be useful for training purposes and awareness and that sort of thing.
Elliot Berman: Yes. So, what do you have that you're working on these days?
John Byrne: I did a very interesting interview yesterday with a staff person from CyberTrace to talk about cryptocurrency issues. So we'll post that in the next few weeks. Also, I'm having an interview with the executive director of Wolfsburg sometime next week. And so, we'll get some insight from him on what's going on with the private sector regarding best practices and issues of concern there. And, you know, I know we have some webinars coming up.
Elliot Berman: Yeah. So later this month in July, we will be doing a webinar on know your customer, a topic that is old but never gets old. As we continue to think as a community about how to capture the best information to understand the risk of onboarding particular customers. And also, not just at the snapshot moment of onboarding, but on an ongoing basis.
I think that'll be helpful. If you'd like to sign up for that, you can go to our website, amlrightsource.com, and find the sign-up for that. And we'll be doing some other interesting webinars late into the summer and into the fall. So we'll continue to talk about those each week when we're together.
John Byrne: Sounds good. Elliot take care of yourself and have yourself a good weekend. And I just would, and we'd be remiss. Cause I know we've mentioned these before and the unfortunate series of shootings in the United States, which continues to happen, but both in the city of Chicago and in Highland Hills, the, again, the loss, the loss of life is just, awful.
And on so many levels. So we do recognize that. Sadly, I think each week we'd have to mention another one cuz it doesn't seem to wanna stop. So I just want folks to know that we are certainly aware of all the things going on around us.
Elliot Berman: Yeah. Highland Park. Not Highland Hills, Highland Park.
John Byrne: I'm sorry. I apologize.
Elliot Berman: Yes, that's okay. Yes. A continuing, I can't even call it a problem. I think epidemic isn't overstating it, right. We need to figure out a way to really face it so we can curtail it. All right, John, have a great weekend. Take care.
John Byrne: Talk to you soon.
Elliot Berman: Yep. Bye-bye.