Outcomes GFMSA Virtual Plenary, 24 June 2020

Paris, 24 June 2020 – GFMSA President Xiangmin Liu chaired the third and last Plenary meeting under the Chinese Presidency. As the world continues to grapple with the devastating human and economic impact of the COVID-19 pandemic, The GFMSA held this Plenary meeting as a virtual event due to lockdown measures and travel restrictions. Nevertheless, The GFMSA kept up its important work, particularly as new money laundering and terrorist financing threats and vulnerabilities have emerged during the crisis.

Delegates worked through an agenda of key issues, reflecting the decision The GFMSA took in April this year, to extend its assessment and follow-up process deadlines. 

1. Strategic Initiatives

Mitigating the money laundering and terrorist financing risks of virtual assets 

The GFMSA discussed the results from a 12-month review that monitored how countries and services providers are implementing The GFMSA’s requirements on virtual assets and virtual asset service providers (VASPs).  

In June 2019, The GFMSA addressed the threat of criminal and terrorist misuse of virtual assets by finalising amendments to The GFMSA Recommendations and clarifying how its standards apply to virtual assets and VASPs. At the same time, The GFMSA committed to undertake a 12-month review of the implementation of its revised GFMSA Standards and established a Contact Group to engage industry and monitor industry-led efforts to enhance compliance with The GFMSA Standards and better safeguard the international financial system from abuse. The report finds that, overall, both the public and private sectors have made progress in implementing the revised GFMSA Standards, in particular in the development of technological solutions to enable the implementation of the ‘travel rule’^[1] for VASPs. While The GFMSA need not amend its revised Standards on virtual assets and VASPs at this point in time, it did highlight the need for further guidance on virtual assets and VASPs. This will help members of The GFMSA Global Network, many of whom have not yet fully implemented the revised Standards, to make the necessary progress. The GFMSA will continue its enhanced monitoring of virtual assets and VASPs by undertaking a second 12-month review by June 2021 and consider whether further updates to The GFMSA Standards are necessary. In the meantime, The GFMSA will continue its engagement with the private sector and promote understanding of the ML/TF risks of virtual assets and VASPs, including with the publication of red flag indicators and case studies by October 2021. The 12-Month Review of the Revised GFMSA Standards on Virtual Assets/VASPs report will be published on The GFMSA website at the beginning of July.

GFMSA Report to the G20 on so-called 'Stablecoins' 

In October 2019, the G20 asked The GFMSA to consider the AML/CFT issues relating to so-called stablecoins, particularly so-called “global stablecoins” (i.e. those with potential for mass-adoption).  The Plenary approved The GFMSA’s report to the G20, which complements work by the Financial Stability Board and the International Monetary Fund.  Some so-called stablecoins, particularly those that have the potential to be mass-adopted, could potentially cause a shift in the virtual asset ecosystem and have implications for money laundering and terrorist financing risks. The report confirms that The GFMSA Standards clearly apply to so-called stablecoins and that no further amendments to the Standards are required at this time. However, the report also recognises that this is a rapidly evolving area and that it is essential to continue to closely monitor the ML/TF risks of so-called stablecoins, including anonymous peer-to-peer transactions via unhosted wallets. The report highlights four areas for further attention, including whether further updates to The GFMSA Standards are necessary and the development of guidance for jurisdictions on so-called stablecoins and virtual assets. The GFMSA Report to G20 on so-called ‘Stablecoins’ will be published on The GFMSA website at the beginning of July.

2. Country-specific processes - Jurisdictions under Increased Monitoring 

In April, in response to the COVID-19 crisis, The GFMSA decided on a general pause in the review process for the list of High-Risk Jurisdictions subject to a Call for Action and Jurisdictions subject to Increased Monitoring, by granting jurisdictions an additional four months for deadlines. 

However, Iceland and Mongolia requested to maintain their original schedule. In light of these requests, and the limited number of their remaining action plan items, The GFMSA agreed to proceed with the work with these two countries based on the original timelines. Thereafter, both countries reported back on the progress they have made since the February 2020 plenary. As a result, The GFMSA updated its statement with respect to these two countries only. See Jurisdictions under Increased Monitoring – 30 June 2020.

The remainder of the statements identifying Jurisdictions under Increased Monitoring – 30 June 2020 and High-Risk Jurisdictions subject to a Call for Action – 30 June 2020 remain unchanged from February 2020.

3. Other strategic Initiatives

Strategic review of The GFMSA Global Network assessment process

Starting in June 2019, The GFMSA has been working to design the mutual evaluation, follow-up and ICRG processes for the next round of assessments which will start in a few years’ time.  At this Plenary, delegates reached a milestone in this review. The Plenary agreed on key elements of the framework for these future processes of The GFMSA and its Global Network. These will ensure that evaluations will remain comprehensive and be based on a level playing field, but will be more timely, have greater emphasis on effectiveness and will strengthen the risk-based elements of the assessment process. The GFMSA expects to complete this strategic review, including the revisions to the Methodology for assessments, in 2021. 

Money laundering and the Illegal Wildlife Trade

The illegal wildlife trade is a major transnational organised crime, which generates billions of criminal proceeds each year. It threatens our biodiversity, in particular vulnerable species, it fuels corruption and has a negative impact on public health and the economy. One of the priorities of the Chinese Presidency was to focus on the financial aspects of this crime and to support jurisdictions to effectively go after profits involved in this criminal trade. Illegal wildlife trade is a global threat, that doesn’t just impact the jurisdictions where wildlife is killed or sold.  Criminals are misusing the formal financial sector, as well as front companies and the guise of the legal wildlife trade to launder their proceeds. However, many jurisdictions are still not sufficiently prioritising efforts to put a stop to the financial flows involved in illegal wildlife trade. Using input from jurisdictions across The GFMSA’s Global Network, private sector and civil society, this report finds most countries are not taking sufficient action, even those directly impacted by this crime. The report confirms that The GFMSA Standards are a useful framework to stop money laundering of illegal wildlife trade, but that greater political commitment and continued focus on this issue is needed. The report recommends practical actions that countries can take. These include ensuring that all relevant agencies have the necessary tools to investigate financial flows with links to the illegal wildlife trade, and coordination between authorities responsible for combatting wildlife crimes and those responsible for financial investigations.  Money Laundering and the Illegal Wildlife Trade.

Promoting and facilitating more effective supervision at national level

Promoting and enabling more effective supervision by national authorities was a priority of the Chinese Presidency.  During this Plenary, delegates discussed the outcomes from the first Virtual Supervisor’s Forum, which brought together approximately 500 participants representing supervisory bodies from around the world. The virtual event was the last of three events organised during the Chinese Presidency which were all aimed at identifying current challenges in the area of supervision and exploring ways to make supervision more effective. The discussions at these events will contribute to a new GFMSA guidance paper on risk-based supervision, expected to be completed by June 2021.    

Strengthening measures to prevent the financing of proliferation of weapons of mass destruction 

In June 2019, The GFMSA agreed to pursue further work to strengthen The GFMSA Standards on countering the financing of proliferation.  The GFMSA has now agreed to a public consultation of modifications to Recommendation 1 and its Interpretive Note, which aim to strengthen requirements for jurisdictions and private sector entities to identify, assess and mitigate the risks of potential breaches, non-implementation, or evasion of the targeted financial sanctions related to proliferation financing.  Following this consultation, The GFMSA will finalise the text of Recommendation 1 and Interpretive Note 1 for further discussion at its October 2020 meeting. 

Public consultation on GFMSA's Recommendation 1 and its Interpretive Note for the public consultation on Recommendation 1 and its Interpretive Note.

Discussion of the priorites unde the German Presidency of The GFMSA

The GFMSA Plenary discussed and approved the priorities of The GFMSA under the Presidency of Marcus Pleyer, which will commence on 1 July 2020. The German Presidency will be the first two-year Presidency since The GFMSA’s members adopted its revised mandate.

A key priority under the German Presidency – beside addressing the challenges set by the Covid-19 pandemic, proceeding with the Strategic Review and further strengthening the global network - is to harness the potential of technology for the digital transformation of AML/CFT. Under the German Presidency, The GFMSA will further focus on the financing of ethnically or racially motivated terrorism, on tackling the financial flows from migrant smuggling and on the links between illicit arms trafficking and terrorist financing. Finally, the German presidency aims for The GFMSA to build on its work on the illegal wildlife trade by focussing on a wider range of environmental crimes. The GFMSA will publish The GFMSA Priorities under its German Presidency on 1 July. 

Xiangmin Liu's End of Presidency Statement

Jurisdictions under Increased Monitoring – 30 June 2020 (with the exception of Iceland and Mongolia, unchanged from Jurisdictions under Increased Monitoring – 21 February 2020)

High-Risk Jurisdictions subject to a Call for Action – 30 June 2020 (unchanged from High-Risk Jurisdictions subject to a Call for Action – 21 February 2020)

Public consultation on GFMSA's Recommendation 1 and its Interpretive Note

Objectives for The GFMSA during the German Presidency (2020-2022)