Money laundering and terrorist financing pose significant threats to economies worldwide. Global cooperation among jurisdictions, financial institutions, and regulatory bodies is essential to combat these illicit activities. The FATF June Plenary brought together delegates from over 200 jurisdictions and international organisations to foster collaboration and drive impactful actions. The outcomes of the June plenary have far-reaching implications for global efforts to tackle financial crimes and ensure the integrity of the international financial system.
In this blog, we will delve into the key outcomes of the FATF June Plenary, highlighting the measures and initiatives aimed at strengthening the global response to money laundering and terrorist financing. From enhanced compliance with virtual assets standards to advancements in asset recovery measures, join us as we explore the significant milestones achieved during this crucial event.
Outcome 1: Collective Action for Global Risk Mitigation
The FATF emphasises the necessity for all countries in the global network to come together and take collective action to effectively address the risks associated with money laundering and terrorist financing. This collective effort is crucial in minimising vulnerabilities and enhancing the resilience of the global financial system.
Outcome 2: Enhanced Compliance with Virtual Assets Standards
Global Implementation of FATF Standards
The FATF has assessed the global implementation of its standards on virtual assets and virtual asset service providers (VASPs). The findings reveal that implementation remains relatively poor, with almost three-quarters of jurisdictions being only partially compliant or non-compliant with the FATF's requirements. This highlights the urgent need for enhanced compliance in regulating virtual assets to prevent criminal exploitation and illicit activities.
Urging Swift Implementation
In response to the findings, the FATF has published a report urging countries to swiftly implement the FATF's Recommendations on virtual assets and VASPs. This includes the crucial Travel Rule, which aims to close loopholes and prevent the transfer of funds to sanctioned individuals or entities. The report emphasizes the emerging risks posed by illicit virtual asset-related activities, including those linked to financing weapons of mass destruction and decentralized finance.
Outcome 3: Advancements in Asset Recovery Measures
Revising Standards for Asset Recovery
The FATF has made significant progress in its work to revise the standards relating to asset recovery. The aim is to strengthen countries' measures to deprive criminals of their ill-gotten gains. This includes developing a new suite of tools that countries should use to effectively freeze, seize, and confiscate criminal property domestically and through international cooperation.
Importance of Effective Asset Recovery
Efficient asset recovery is crucial in dismantling criminal networks and disrupting their illicit activities. By depriving criminals of their financial resources, authorities can undermine their operations and deter future criminal behaviour. The advancements in asset recovery measures will empower countries to take more effective action against money laundering, terrorist financing, and other financial crimes.
Outcome 4: Addressing Unintended Consequences and Anti-Corruption Measures
Mitigating Unintended Consequences
The FATF recognizes the importance of addressing unintended consequences that may arise from the implementation of its recommendations. Efforts are underway to ensure consistent and correct implementation, minimizing risks such as de-risking, financial exclusion, and the undue targeting of non-profit organizations (NPOs). By identifying and mitigating these unintended consequences, the FATF aims to strike a balance between effective financial regulation and maintaining the financial system's integrity.
Contribution to Anti-Corruption Efforts
The fight against corruption is a global priority, and the FATF plays a valuable role in complementing the work of other international bodies in this area. The Plenary discussed the assessment of Recommendation 36, which focuses on the implementation of relevant articles of the United Nations Convention Against Corruption (UNCAC). This assessment aims to improve the consistency of evaluations across the FATF Global Network. Additionally, progress updates were provided on ongoing work related to the misuse of citizenship and residency by investment schemes, which contribute to anti-corruption endeavours.
Outcome 5: Mutual Evaluations and Quality Assessments
Preparations for the Fifth Round of Mutual Evaluations
The FATF is actively preparing for the fifth round of mutual evaluations, a critical process to assess the effectiveness of countries' measures against money laundering and terrorist financing. As part of these preparations, the FATF is developing Universal Procedures that will apply to all assessments conducted in the next round, ensuring consistent evaluation standards across jurisdictions. The goal is to ensure that a fully trained assessment team of experienced AML/CFT experts carries out each mutual evaluation, contributing to comprehensive and accurate assessments.
Assessing Unintended Consequences and Enhancing Assessment Methodologies
The FATF recognizes the importance of addressing unintended consequences that may arise from the implementation of its recommendations. To tackle this issue, the Plenary agreed on amendments to the Methodology for the fifth round of mutual evaluations, ensuring that each assessment considers the incorrect implementation of the FATF Recommendations. By enhancing assessment methodologies, the FATF aims to identify and rectify gaps in the implementation process, promoting more effective measures against money laundering and terrorist financing.
Outcome 6: Cameroon, Croatia, and Vietnam Added to Grey List
The FATF recognizes the importance of collaboration and proactive measures in combating money laundering, terrorist financing, and proliferation financing. Cameroon, Croatia, and Vietnam are newly added to the list of jurisdictions under increased monitoring. These jurisdictions have demonstrated their commitment to addressing strategic deficiencies in their anti-money laundering (AML) regimes and are actively working with the FATF to implement action plans aimed at swiftly resolving identified deficiencies within agreed timeframes.
Significance of Increased Monitoring and Action Plans
When a jurisdiction is placed under increased monitoring, it signifies the country's dedication to enhancing its AML framework and mitigating risks associated with financial crimes. The FATF's decision to monitor these jurisdictions underscores the need for collective action and international cooperation to protect the integrity of the global financial system. By implementing action plans, Cameroon, Croatia, and Vietnam aim to strengthen their AML measures, address vulnerabilities, and effectively counter money laundering, terrorist financing, and proliferation financing.
Final Thoughts
The FATF June Plenary yielded significant outcomes, including collective action for global risk mitigation, enhanced compliance with virtual assets standards, advancements in asset recovery measures, addressing unintended consequences and anti-corruption measures, mutual evaluations and quality assessments, and increased monitoring of jurisdictions such as Cameroon, Croatia, and Vietnam.
The outcomes highlight the critical role of international cooperation and collaboration in combating money laundering, terrorist financing, and proliferation financing. By working collectively, jurisdictions can strengthen their AML frameworks, close regulatory gaps, and effectively tackle financial crimes.
It is crucial for all stakeholders, including governments, financial institutions, and individuals, to stay informed and actively contribute to the fight against financial crimes. We can create a more secure and resilient financial system by adhering to global standards, implementing robust AML measures, and fostering collaboration.
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