FATF PLENARY OUTCOMES

FATF held a Plenary meeting on 17th to 19th October.  The main issues dealt with are detailed below.

STATUS OF EXPANSION OF MEMBERSHIP OF FATF

The process continues for Saudi Arabia.  Israel will become a member if/when its mutual evaluation assessment is accepted and meets the necessary requirements for membership.

COMBATING THE FINANCING OF TERRORISM

An update on the evolution of these terrorist financing strategies since the FATF’s 2015 report was provided in a public statement –

http://www.fatf-gafi.org/publications/methodsandtrends/documents/isil-alqaeda-affiliates-financing-update.html

This Public Statement includes the comments that –

ISIL’s revenue derived from the sale of oil and oil products has decreased dramatically.  Nonetheless, ISIL’s primary sources of revenue still include the smuggling and sale of oil and oil products, as well as extortion and taxation of local populations in areas under its control.  Other varied revenue streams from both legitimate sources (salaries, savings, unemployment benefits, loans) and illegitimate sources (kidnapping for ransom; bank looting; and other extortion activity, including outside of ISIL-dominated territory) continue to be exploited for the benefit of the terrorist group, as well.

Small-scale funding (such as self-funding, crowdfunding and contributions from family and relatives), particularly in the context of small cells and lone actors, appears to be increasingly common.

Al-Qaeda and affiliates remain a threat.

Physical cash movement remains a key method of transferring value to fund terrorist activities, including ISIL, Al-Qaeda and their affiliates.

REGULATION OF VIRTUAL ASSETS

Amendments to FATF standards were agreed, and exchanges and wallet providers will be required to implement AML/CFT controls, and to be licensed or registered and supervised or monitored by national authorities.  FATF will update its Guidance to assist countries with the full and effective implementation of these requirements of the FATF Standards.  A statement was published –

http://www.fatf-gafi.org/publications/fatfrecommendations/documents/regulation-virtual-assets.html

FATF uses the term “virtual asset” to refer to digital representations of value that can be digitally traded or transferred and can be used for payment or investment purposes, including digital representations of value that function as a medium of exchange, a unit of account, and/or a store of value.  FATF emphasises that virtual assets are distinct from fiat currency (aka “real currency,” “real money,” or “national currency”), which is the money of a country that is designated as its legal tender.

FATF Recommendations already set out comprehensive requirements for combating money laundering and terrorist financing that apply to all forms of financial activity — including those that make use of virtual assets.  FATF has adopted changes to the FATF Recommendations and Glossary that clarify how the Recommendations apply in the case of financial activities involving virtual assets.

FUTURE WORK ON PROLIFERATION FINANCING

FATF has started a project that will consider the feasibility of expanding the FATF Recommendations applicable to proliferation financing as well as enhancing implementation of existing obligations.

MUTUAL EVALUATIONS

Discussion of the mutual evaluation reports of Israel and the UK – due for publication by December.

Discussion of follow-up reports for the mutual evaluations of Austria, Denmark and Malaysia in which all 3 countries achieved technical compliance re-ratings

IDENTIFYING JURISDICTIONS WITH STRATEGIC AML/CFT DEFICIENCIES

North Korea and Iran (with suspension of countermeasures against Iran extended to February 2019)

http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-october-2018.html

Grey List: Bahamas, Botswana, Ethiopia, Ghana, Pakistan, Serbia, Sri Lanka, Syria, Trinidad & Tobago, Tunisia, Yemen

http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/fatf-compliance-october-2018.html

Bahamas, Botswana and Ghana are jurisdictions with strategic AML/CFT deficiencies.  However, each country has developed an action plan with the FATF to address the most serious deficiencies.  FATF welcomed the high-level political commitment of each country to their respective action plans.

ADOPTION OF 2 RISK-BASED APPROACH GUIDANCE PAPERS

To be published shortly –

  • Risk-Based Approach Guidance for the Life Insurance Sector
  • Risk-Based Approach Guidance for the Securities Sector

FATF WILL DEVELOP GUIDANCE ON DIGITAL IDENTITY

The guidance will consider endorsement by national authorities as a key test for the acceptability of digital ID.  It will focus mainly on the reliability and independence features of digital ID that are not issued on the basis of a process that is agreed, regulated or supervised by a national authority.  Further, the guidance will consider and describe potential risks as well as opportunities for their mitigation in the context of digital ID.  FATF will consider a first draft of this guidance in February with a planned completion of the project in June following further consultation with private sector experts.

http://www.fatf-gafi.org/publications/fatfgeneral/documents/outcomes-plenary-october-2018.html#one

 

Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

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