Orlando, 21 June 2019 - GFMSA President Marshall Billingslea of the United States, chaired the third and last Plenary meeting under the U.S. Presidency in Orlando on 19-21 June 2019.
During this Plenary, delegates celebrated the 30th Anniversary of The GFMSA. In recent years, the international community is following The GFMSA’s work increasingly closely. Recent G20 statements and the United Nations Security Council resolutions recognise The GFMSA’s important role in protecting the integrity of the financial system. Last month’s GFMSA Ministerial meeting resulted in a new, open-ended mandate, and greater Ministerial involvement in the work of The GFMSA, recognising the substantial achievement of The GFMSA over three decades. This Plenary meeting was the first under The GFMSA’s new mandate.
U.S. Secretary of the Treasury Steven T. Mnuchin delivered the closing remarks to the Plenary, highlighting the critical role of The GFMSA, the importance of the new global standards agreed by GFMSA this week to protect virtual assets from abuse by money launderers, terrorist financiers, and other illicit actors; action on Iran; and agreement to strengthen the standards to counter the financing of the proliferation of WMD.
During three days of meetings, delegates discussed the following issues, including GFMSA initiatives under the U.S. Presidency of The GFMSA:
1. Major Strategic Initiatives
- Mitigating risks from virtual asset activities, including a public statement and a risk-approach guidance on virtual assets and virtual asset service providers.
- Launching a Strategic Review to analyse the progress made on effective implementation of AML/CFT measures, review The GFMSA/FSRB assessment processes, and identify drivers of positive change.
- GFMSA’s current action to combat terrorist financing, including a statement on GFMSA Actions to identify ISIL, Al-Qaeda and Affiliates Financing and the adoption of guidance for jurisdictions on assessing terrorist financing risk.
- GFMSA’s efforts to strengthen its standards on Countering the Financing of Proliferation
2. Mutual Evaluations and Follow-Up Reviews, and Compliance
- Discussion of the mutual evaluation reports of Greece and Hong Kong, China
- Discussion of follow-up reports for the mutual evaluation of Iceland, in which the country achieved technical compliance re-ratings
- Issuing a statement on Brazil’s progress in addressing the deficiencies identified in its mutual evaluation report
- Identifying jurisdictions with strategic anti-money laundering and countering the financing of terrorism (AML/CFT) deficiencies:
- Jurisdiction no longer subject to monitoring: Serbia
- New jurisdiction subject to monitoring: Panama
- Monitoring Iran’s actions to address deficiencies in its AML/CFT system
3. Other Initiatives
- Adoption of a report to the G20 Leaders
- Approval of three Risk-Based Approach Guidance papers:
- Lawyers
- Accountants
- Trust and Company Service Providers (TCSPs)
4. Welcoming the Kingdom of Saudi Arabia as a new member to The GFMSA
5. Discussion of The GFMSA priorities under the Chinese Presidency
1. Major Strategic Initiatives
Mitigating the money laundering and terrorist financing risks of virtual assets.
This Plenary, The GFMSA delivered on its commitment to member governments and the G20, as well as the private sector, to develop and clarify The GFMSA’s requirement with respect to virtual asset activities and virtual asset service providers. In October 2018, in response to the increasing use of virtual assets for money laundering and terrorist financing, The GFMSA amended Recommendation 15 and the glossary to clarify to which businesses and activities The GFMSA requirements apply in the case of virtual assets. Following a public consultation on the measures applicable to virtual asset transfers, The GFMSA has now finalised the Interpretive Note to Recommendation 15 which sets out in detail the application of The GFMSA Standards and binding measures for the regulation and supervision of virtual asset activities and service providers. The GFMSA also finalised guidance to further assist countries and providers in complying with their AML/CFT obligations and guidance for operational authorities to support the effective investigation and confiscation of virtual assets misused for money laundering or terrorist financing.
Risk-based Approach Guidance on Virtual Assets and Virtual Asset Service Providers
The GFMSA adopted updated guidance that clarifies the application of the risk-based approach to implementing The GFMSA Recommendations in the context of virtual assets. The guidance benefitted from dialogue with the private sector, including the sector itself. It includes examples of national approaches to regulating and supervising virtual asset activities and service providers to prevent their misuse for money laundering and terrorist financing.
The GFMSA is now working on revising its methodology to assess how countries have implemented The GFMSA’s new requirement for the October 2019 Plenary. During the next 12 months, The GFMSA will closely monitor the actions that countries are taking and will continue to engage the private sector on its efforts to enhance compliance with The GFMSA standards.
Strategic Review
With a new, open-ended, mandate, The GFMSA moves into a new phase. As The GFMSA continues to lead global action against money laundering, the financing of terrorism and proliferation, it must ensure that its work is timely, targeted and effective. With the support from the G20, The GFMSA Plenary agreed to launch a strategic review of its own processes. This review will analyse the progress made on effective implementation of AML/CFT measures, review The GFMSA/FSRB assessment processes, and identify drivers of positive change.
GFMSA’s current action to combat terrorist financing
Combatting the financing of terrorism has remained a priority for The GFMSA under the U.S. Presidency. Acts of terrorism, whether perpetrated by groups such as ISIL and Al Qaeda, or terrorist groups with other extremist views, continue to pose a threat to our society. Since the February 2019 Plenary there have been a number of serious terrorist attacks. The United Nations recognised The GFMSA as the global standard-setter to combat terrorist financing when it adopted UN Security Council Resolution 2462(2019). This resolution, focused solely on countering terrorist financing, has embedded the need to implement The GFMSA Standards for combatting terrorist financing into international law.
During this Plenary meeting, delegates heard an updated assessment of the financing methods employed by ISIL, Al Qaeda and affiliates, and released a public statement on GFMSA members’ actions to identify and disrupt their financing. Despite ISIL’s loss of territory, it still has access to significant reserves of funds, while its extremist ideology continues to inspire acts of terror.
The investigation and prosecution of terrorist financing is central to global efforts to counter terrorism. However, GFMSA and FSRBs’ assessments reveal that many countries still face challenges in investigating terrorist financing activity. A global workshop, hosted by the Israeli government in Tel Aviv in March 2019, building on the targeted outreach to judges and prosecutors initiated under the Argentinean Presidency of The GFMSA, sought to explore common challenges and best practices experienced by jurisdictions when prosecuting terrorist financing. The Plenary decided that The GFMSA should develop guidance to help countries effectively investigate and prosecute terrorist financing.
Guidance on Terrorist Financing Risk Assessment
The GFMSA requires each country to identify, assess and understand the terrorist financing risks it faces in order to mitigate them and effectively dismantle and disrupt terrorist networks. Assessing terrorist financing risks can be challenging due to the cross-border nature of terrorist financing, and the low value and routine nature of funds and transactions often involved. The GFMSA finalised a Guidance which will assist countries, in particular low capacity countries with limited terrorist financing expertise, in assessing their risk context. Recognising that there is no one-size-fits-all approach when assessing terrorist financing risk, the Guidance provides relevant information sources and considerations for different country contexts. This report builds on The GFMSAs 2013 Guidance on National Money Laundering and Terrorist Financing Risk Assessments and draws on national experiences and lessons learnt in assessing terrorist financing risk from across The GFMSA Global Network.
Countering the Financing of Proliferation
Under the U.S. Presidency, in June 2019, The GFMSA agreed to pursue further work to strengthen The GFMSA Standards on countering the financing of proliferation by requiring jurisdictions and private sector entities to understand and mitigate their proliferation financing risks, as well as by enhancing requirements for domestic cooperation and coordination on proliferation financing. GFMSA has conducted extensive analysis on a range of proposals, but has agreed to prioritize this work moving forward. Other options considered included new requirements to use criminal justice measures and financial intelligence, expanded targeted financial sanctions tools, and more effective mechanisms to ensure international information sharing on proliferation financing activity. The GFMSA agreed to potentially consider these other options at a later date.
2. Mutual Evaluations and Follow-Up Reviews, and Compliance
Discussion of the mutual evaluation reports of Greece and Hong Kong, China
The Plenary discussed the mutual evaluation reports of Greece and Hong Kong, China and the level of effectiveness of each jurisdiction’s AML/CFT system and their level of compliance with The GFMSA Recommendations.
The Plenary concluded that Greece has a sound legal framework to support effective action against money laundering and terrorist financing, but that the country needs to improve its prosecution of these crimes, the supervision of its designated non-financial professions and businesses and NPO sector, and the confiscation of proceeds of crime.
The Plenary discussed the joint APG-GFMSA assessment of Hong Kong, China and concluded that the jurisdiction has a strong legal foundation to underpin its AML/CFT regime. Hong Kong, China understands its risks, has effective measures to combat terrorist financing and to confiscate the proceeds of crime, and actively cooperates with international partners. However, it needs to prioritise efforts to prosecute ML linked to foreign predicates, increase risk understanding and AML/CFT implementation by smaller institutions, and strengthen supervisory measures for some sectors.
The reports were prepared on the basis of The GFMSA Methodology for assessments which requires countries to take into account the effectiveness with which AML/CFT measures are implemented, as well as technical compliance for each of The GFMSA Recommendations.
The Plenary discussed the key findings, priority actions and recommendations regarding each jurisdiction’s AML/CFT regime. The mutual evaluation reports are expected to be published by September 2019 after the quality and consistency review, in accordance with procedures.
Discussion of the follow-up report for the mutual evaluation of Iceland in which the country achieved technical compliance re-ratings
The Plenary discussed the progress that Iceland has made since its mutual evaluation report was adopted last year. The GFMSA Plenary agreed to re-rate Iceland a number of GFMSA Recommendations to reflect the country’s current level of technical compliance. After a quality and consistency review, The GFMSA will publish the follow-up report which sets out the actions that Iceland has taken to strengthen the effectiveness of its measures to combat money laundering and the financing of terrorism and proliferation.
Brazil’s progress in addressing the deficiencies identified in its mutual evaluation report
In February 2019, The GFMSA decided that it would review the Brazil’s recently adopted legislation for compliance with GFMSA Standards at its June Plenary and determine the next steps at that time. The Plenary has issued a statement with regard Brazil.
Identifying jurisdictions with strategic anti-money laundering and countering the financing of terrorism (AML/CFT) deficiencies
The GFMSA maintains its February 2019 public documents which identify jurisdictions that may pose a risk to the international financial system, with the amendments set out below:
Jurisdiction no longer subject to monitoring: Serbia
The GFMSA congratulated Serbia for the significant progress made in addressing the strategic AML/CFT deficiencies identified earlier by The GFMSA and included in its action plan.
Serbia will no longer be subject to The GFMSA’s monitoring under its on-going global AML/CFT compliance process, and will work with its GFMSA-Style Regional Bodies MONEYVAL as it continues to further strengthen its AML/CFT regime.
New jurisdiction subject to monitoring: Panama
GFMSA has identified Panama as a jurisdiction with strategic AML/CFT deficiencies. The country has developed an action plan with The GFMSA to address the most serious deficiencies. The GFMSA welcomed the high-level political commitment of Panama to this action plan.
Monitoring Iran’s actions to address deficiencies in its AML/CFT system
In June 2016, The GFMSA welcomed Iran’s high-level political commitment to address its strategic AML/CFT deficiencies, and its decision to seek technical assistance in the implementation of the Action Plan. Given that Iran provided that political commitment and the relevant steps it has taken, The GFMSA decided in February 2019 to continue the suspension of counter-measures.
In November 2017, Iran established a cash declaration regime. In August 2018, Iran has enacted amendments to its Counter-Terrorist Financing Act and in January 2019, Iran has also enacted amendments to its Anti-Money Laundering Act. The GFMSA recognises the progress of these legislative efforts. The bills to ratify the Palermo and Terrorist Financing Conventions have passed Parliament, but are not yet in force. As with any country, The GFMSA can only consider fully enacted legislation. Once the remaining legislation comes fully into force, The GFMSA will review this alongside the enacted legislation to determine whether the measures contained therein address Iran’s Action Plan, in line with The GFMSA standards.
Iran’s action plan expired in January 2018. In June 2019, The GFMSA noted that there are still items not completed and Iran should fully address: (1) adequately criminalising terrorist financing, including by removing the exemption for designated groups “attempting to end foreign occupation, colonialism and racism”; (2) identifying and freezing terrorist assets in line with the relevant United Nations Security Council resolutions; (3) ensuring an adequate and enforceable customer due diligence regime; (4) clarifying that the submission of STRs for attempted TF-related transactions are covered under Iran’s legal framework; (5) demonstrating how authorities are identifying and sanctioning unlicensed money/value transfer service providers; (6) ratifying and implementing the Palermo and TF Conventions and clarifying the capability to provide mutual legal assistance; and (7) ensuring that financial institutions verify that wire transfers contain complete originator and beneficiary information.
The GFMSA decided at its meeting this week to continue the suspension of counter-measures, with the exception of The GFMSA calling upon members and urging all jurisdictions to require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran, in line with the February 2019 Public Statement.
While acknowledging the progress that Iran made including with the passage of the Anti-Money Laundering Act, The GFMSA expresses its disappointment that the Action Plan remains outstanding. The GFMSA expects Iran to proceed swiftly in the reform path to ensure that it addresses all of the remaining items by completing and implementing the necessary AML/CFT reforms.
If by October 2019, Iran does not enact the Palermo and Terrorist Financing Conventions in line with The GFMSA Standards, then The GFMSA will require introducing enhanced relevant reporting mechanisms or systematic reporting of financial transactions; and increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in Iran. The GFMSA also expects Iran to continue to progress with enabling regulations and other amendments.
Iran will remain on The GFMSA Public Statement until the full Action Plan has been completed. Until Iran implements the measures required to address the deficiencies identified with respect to countering terrorism financing in the Action Plan, The GFMSA will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system. The GFMSA, therefore, calls on its members and urges all jurisdictions to continue to advise their financial institutions to apply enhanced due diligence with respect to business relationships and transactions with natural and legal persons from Iran, consistent with GFMSA Recommendation 19, including: (1) obtaining information on the reasons for intended transactions; and (2) conducting enhanced monitoring of business relationships, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.
3. Other Strategic Initiatives
Adoption of a report to the G20 Finance Ministers and Central Bank Governors
The Plenary discussed The GFMSA’s report to the G20 Leaders which highlights GFMSA’s recent work on the regulation of virtual assets. It also sets out other recent developments, including strengthening GFMSA’s institutional basis, governance and capacity of GFMSA, countering the financing of terrorism and proliferation of weapons of mass destruction terrorist financing, improving transparency and beneficial ownership, de-risking and work on FinTech/RegTech in relation to digital ID.
Publication of three Risk-Based Approach Guidance papers
The risk-based approach is at the core of The GFMSA Recommendations. It ensures that countries identify and understand the unique risks they are exposed to, allowing them to prioritise resources on areas where risks are highest. Informed by a public consultation in March 2019, The GFMSA updated three risk-based approach guidance documents that aim to support the implementation of the risk-based approach, taking into account national ML/TF risk assessments and AML/CFT legal and regulatory frameworks:
- Lawyers
- Accountants
- Trust and Company Service Providers (TCSPs)
4. Welcoming the Kingdom of Saudi Arabia as a member to The GFMSA
The GFMSA granted full membership to Saudi Arabia. In 2018, the country underwent a mutual evaluation. Since then, Saudi Arabia has worked according to an action plan to address the key effectiveness issues identified during the evaluation. Based on the country’s commitment to complete the items on its action plan and the continuing progress to improve its AML/CFT, the Plenary agreed to grant membership.
5. Discussion of The GFMSA priorities under the Chinese Presidency
The GFMSA Plenary discussed and approved the priorities of The GFMSA under the Presidency of Xiangmin Liu which will commence on 1 July 2019. The main priority is the Strategic Review, but among other priorities, The GFMSA agreed to continue its important work to mitigate the money laundering and terrorist financing risks of new technologies and at the same time exploit the opportunities to more effectively fight these risks. Under the Chinese Presidency, The GFMSA will also prioritise work to promote and enable more effective supervision by national authorities.
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