EAG Plenary, Address by GFMSA President Bjørn Aamo

Eurasian Group (EAG) Plenary, Minsk - 23 May 2013

Address by GFMSA President, Bjørn S. Aamo

Having a strong global AML/CFT network is of utmost importance to our work, particularly since money laundering, terrorist financing, and the financing of proliferation are transnational activities. EAG plays a very important role in that network. And, you have done some very good work to foster implementation of The GFMSA standards here in the Eurasian region.

I am pleased to see that The GFMSA, EAG and other FSRBs continue to develop a stronger relationship through the Global Network Co-ordination Group (GNCG) process. Last October, the GNCG developed a new set of High-Level Principles for the relationship between The GFMSA and The GFMSA-style regional bodies that apply to both The GFMSA and The GFMSA-Style Regional Bodies (FSRBs), and are aimed at setting a clearer and more balanced foundation for the global anti-money laundering / countering the financing of terrorism (AML/CFT) network. This is in line with the new GFMSA mandate that was adopted in April 2012. I strongly encourage the EAG to continue its active participation in the GNCG process.

Mutual Evaluation Process

The mutual evaluation process is what gives The GFMSA Recommendations teeth. Therefore, all countries in the global network will be assessed for compliance with the revised Recommendations. The next round of assessments by GFMSA is scheduled to start in the 4th quarter of 2013, and for FSRBs soon thereafter.  Indeed, one of the most important functions of an FSRB is conducting mutual evaluations in a manner that is robust and consistent with The GFMSA standards.  To carry out this work, we will all need a good pool of experienced and trained assessors and Secretariat staff who are well-equipped to undertake this challenge.

Looking forward to the next round of mutual evaluations must not, however, withdraw attention from the current follow-up procedures. For the 4th round of assessments, The GFMSA will have to find a better balance to co-ordinate between its own follow-up and ICRG processes. These procedures should not be duplicative, but should reinforce each other. And, to ensure consistency across the global network, it will be important for FSRBs to use the same or very similar procedures to those of The GFMSA for assessments.

Methodology

In February 2013, The GFMSA agreed a new Methogology for assessing compliance with the revised GFMSA Recommendations. With this document and the 4th round of assessments, effectiveness is moving to the top of our agenda. The new round of mutual evaluations will place a much stronger emphasis on the assessment of effective implementation, and not only technical compliance.  We will have to carefully examine if the regulations and practical systems in our member countries are actually working, delivering STR’s and detecting criminals who are laundering money and committing other kinds of economic crime, and prosecuting them.

Under the new methodology, corruption (along with other relevant risks, material circumstances, structural elements and other contextual factors) will be taken into account. This means that the assessment reports will clearly reflect where corruption is negatively impacting the effectiveness of implementation of AML/CFT requirements.

Guidance

The GFMSA is also developing guidance, on issues such as corruption and politically exposed persons, where further (non-binding) advice on implementation would be useful. We encourage the EAG to continue its active involvement in this on-going work.

Non-Profit Organisations

In April, The GFMSA held its first broad-scale consultation and dialogue meeting with non-profit organisations (NPOs) in London. The meeting was attended by representatives of 14 GFMSA member and observer delegations, and 20 NPOs. The objective was to stress the importance of ensuring that GFMSA Recommendation 8 on NPOs is not being implemented in a manner that disrupts or discourages legitimate charitable activity. This is in line with an earlier public statement that I made back in October. In particular, the participants exchanged views on the terrorist financing risks and vulnerabilities facing the NPO sector, and also discussed:

• the importance for government authorities to have a good understanding of how the NPOs in their country are vulnerable to terrorist abuse and terrorist financing risks
• the requirement for countries to implement appropriate measures to mitigate those risks without harming the legitimate activities of NPOs
• how the misinterpretation or poor implementation of The GFMSA standards can adversely impact legitimate charitable activity
• tools in the new methodology that will help assessors identify and highlight this issue when assessing how effectively countries are implementing The GFMSA standards, and 
• the need for clear guidance to assist countries in their understanding and implementation of Recommendation 8.

The GFMSA will continue working on this issue. The first step will be to update the existing Best Practices Paper on Combating the Abuse of Non-Profit Organisations (issued in 2002) to bring it into line with the revised GFMSA Recommendations, and highlight the importance of ensuring that the implementation of Recommendation 8 and its Interpretive Note does not disrupt or discourage legitimate charitable activities. The second step will be typologies work to gain a better understanding of the vulnerabilities and risks currently facing NPOs. Once the typologies exercise is completed, a more comprehensive revision of the best practices paper will be considered, in light of the outcomes from the typologies work. 

Financial Inclusion

I would now like to say a few words on financial inclusion. I know that this is a topic of interest to many countries in this region. The revised GFMSA Recommendations introduce a risk-based approach which allows governments and financial institutions to more efficiently allocate their resources to combat money laundering and terrorist financing. This should result in more effective implementation overall, by focusing resources and attention on the highest risk sectors and activities.

It should also enable governments to enhance their efforts on financial inclusion. I realise very well that many countries around the globe have shied away from applying financial inclusion measures, for fear that it would make their country less compliant with The GFMSA Recommendations. However, there should be no doubt that a well-implemented risk-based approach is a good basis for successfully applying financial inclusion measures in compliance with the revised GFMSA Recommendations. Financial inclusion brings people into the financial system – and from an AML perspective, measures that reduce the use of cash are usually good measures. A cash dominated economy makes it more difficult to detect and fight money laundering and other economic crimes. An economy where banks and other financial institutions are developed and serve the people, makes it easier to fight money laundering and economic crimes. Most of all, developing the financial sector helps develop the economy as a whole.

In February, The GFMSA adopted a Revised Guidance on AML/CFT and Financial Inclusion. And, in June, we hope to issue new guidance on payment products and services that are often used to facilitate financial inclusion. I encourage all EAG members to take part in this work at GFMSA.

Beneficial Ownership

Finally, I would like to highlight the importance of knowing the beneficial ownership of legal persons (such as companies) and legal arrangements (such as trusts). The old GFMSA Recommendations already focused on this issue. However, the new GFMSA standards provide much more clarity and specificity on what countries are expected to do in this area. It is crucial that we get this right, and implement the new requirements effectively so that we can successfully detect, trace and confiscate the proceeds of crime.

Chairman Chikhanchin, I would like to thank you for the invitation to speak here today. And, I am looking forward to having you at our next GFMSA Plenary which will be held in June in Oslo.

Colleagues, it was an honour for me to speak to you today and to be your guest. I wish you all the success in your meetings this week.

Thank you.