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8th ESAAMLG Council of Ministers Meeting
Keynote Address by the FATF President
Antonio Gustavo Rodrigues
22 August 2008
Honorable Minister Michuki, Ministers, distinguished guests, colleagues and friends. Good morning.
I present my respects for the passing away of President Mwanawasa of Zambia.
I am honoured to be here at the Council of Ministers Meeting. I am grateful also for the opportunity to participate in the meetings of the Task Force of Senior Officials in recent days.
This is my first opportunity to attend meetings of the ESAAMLG but it is not the first visit to beautiful Kenya. I had the pleasure to visit Nairobi in the early nineties and took a weekend to go Amboseli Park and see the Kilimanjaro Mountain in the neighbour Tanzania. I also had the opportunity to visit, in other occasions, Malawi and South Africa. I still have to visit many countries in this beautiful region.
The importance of the work carried out by ESAAMLG cannot be stressed enough and I’m not the first FATF President to recognize that. Both of my immediate predecessors, Mr Frank Swedlove and Sir James Sassoon, attended ESAAMLG meetings in 2007. And, before them, Professor Kadar Asmal from South Africa, spoke at your meeting in Livingstone in 2005.
ESAAMLG has clearly matured and achieved much since its MOU was signed in 2002. However, there is still much to be done.
Since you are the leaders in this region, I congratulate you for the accomplishments so far. At the same time, as leaders, I have to call for your continued support illuminating the path for the other accomplishments that are needed for the fight against money laundering and terrorist financing. This will also be an important tool for the development of this region and your own countries.
This morning I would like to talk a little bit about the FATF Standards and the mutual evaluations and then share with you some of my views of the FATF priorities for this year. There is much I want us to achieve together.
First, the Standards and Mutual Evaluations.
Money laundering and terrorist financing techniques evolve and transform quickly, and they present new threats to our financial systems. We live in an increasingly interconnected world and money launderers will exploit any gaps between countries. This is as true for financial systems based on sophisticated technology as it is for those systems where cash is predominant. For this reason, we must have a global solution to a global challenge. Consistent application of recognised international standards is essential.
A central element of the FATF’s business, and indeed the ESAAMLG’s business, is the peer review process through which the FATF, the FSRBs and the international financial institutions evaluate the AML/CFT systems of countries around the world.
Implementing the Recommendations is a challenge for all countries. No FATF or FSRB member is yet able to fully meet all of the standards. The evaluation process is an essential means by which each of our countries understand where we have made achievements of which we can be proud and where we have more to be done. The mutual evaluation process is an important learning experience for us all. Timely publication of the final mutual evaluation reports demonstrates our commitment to the standards and the transparency of this publication process attracts and reassures other governments and international investors alike. I am pleased to see the mutual evaluation reports of Botswana, Namibia and Zimbabwe as well as the DSI report for Lesotho have been published on ESAAMLG’s website.
We have now past half way through the 3rd round of evaluations of FATF members. And with the adoption and publication of the mutual evaluations of the Republics of Malawi, Seychelles and Zambia, ESAAMLG will also be half way through the mutual evaluations of its members. This is no small task!
As you know, FSRBs, such as ESAAMLG, provide essential focal points in their regions and are important for supporting national efforts and promoting consistency in application of the FATF standards. And you, as the ESAAMLG Council of Ministers, steer this agenda and ensure its momentum across the region. Your leadership and direction is important to ensuring that ESAAMLG members implement and enhance AML/CFT systems. Your leadership is important to ensuring that ESAAMLG is effectively coordinating and monitoring members’ progress in doing so.
At the last FATF meeting I took the opportunity to discuss my priorities for this year. I’ll take some time to highlight three of the ideas: a review of the FATF standards; some issues relating to low capacity countries; and the role of FSRBs in the FATF.
Review of the Standards
Since the adoption of the Recommendations and the Methodology, several delegations have raised concerns about some of their provisions. Indeed, at various meetings of the FATF and FSRBs there has been detailed discussion on interpretation or application of certain elements of the Recommendations and the evaluation methodology. However, the discussion about such concerns has been treated on a case-by-case basis. Once the meeting is over, often that discussion goes no further.
A proposal has been tabled in the FATF aiming at providing a mechanism to consider all such concerns in a coordinated way, giving the opportunity to the several parties to contribute in the identification of the issues and to the group the opportunity to decide what really needs to be addressed. I should note that we are discussing a review, a fine tuning, not a revision of the Recommendations. In addition, we have no intention of changing the goal posts during the current round of evaluations.
Since it will take time to identify, discuss and find solutions for the issues that may be raised, we’d better start the planning soon so we will not delay the next round of evaluations. Over the next year the FATF will establish agreed parameters for this review of the standards and the evaluation methodology.
Why undertake such a review? I believe it is good for everybody to re-assess from time to time the principles and practices that underpin our work. I also believe we need, from time to time, to stop and absorb any lessons from implementing and evaluating the current standards.
All FATF delegations, including ESAAMLG, were asked to provide written comments on the proposal. The proposal will be discussed further in the October FATF plenary. Given its broad experience, including experience in implementing the Recommendations in countries with very real capacity constraints, the ESAAMLG can provide an important contribution.
Low Capacity Countries
In February, FATF took an important step in adopting its first policy towards low capacity countries. However, the special needs of such jurisdictions and the challenges they face call for a continuous effort in this area, with fundamental support from the FSRBs and the International Financial Institutions, so as to allow a steady implementation of the Recommendations. I am very interested in all proposals that may help bringing more and more jurisdictions to the FATF family and in good shape.
Of course, before the FATF’s guidance for low capacity countries came into being, ESAAMLG created the DSI, the ‘Development Strategy Implementation’ initiative to support capacity building in advance of a mutual evaluation by identifying technical assistance against 25 recommendations.
I might also mention the Strategic Implementation Planning Framework, developed by the APG and the World Bank. This is an important tool to prioritise implementation of the many needs identified in mutual evaluation reports, especially, but certainly not only, for countries with capacity constraints. The FATF, the APG and the World Bank plan to continue working together on initiatives such as this. I hope you will join us. It feels like a real momentum is building as many of our organisations are focussed on this important implementation issue. More can and will be done to assist implementation of the Recommendations in low capacity countries.
We have always to remember that a chain is as strong as the weakest link.
Some jurisdictions are not simply facing capacity constraints. Some jurisdictions expose us all to unacceptable risk by failing to implement effective AML/CFT systems. To address this, in 2006 the FATF adopted a new process to identify, examine and engage with vulnerable jurisdictions. Since then we have achieved some good results with almost all countries in the process.
However, when a country chooses not to engage with the FATF in a meaningful way, the FATF must be ready to take firm action. The FATF has made public its concerns with certain jurisdictions so as to allow all others to alert their financial institutions to take into account the increased risk. The FATF will, of course, continue to follow up the situation with these jurisdictions, hoping that each of those areas will show, in the near future, clear progress in addressing the deficiencies in their AML/CFT regimes.
The Role of the FSRBs
I see the year ahead as one in which we will more clearly acknowledge the important role played by various institutions and organisations in this process and ensure that their voices can contribute more in devising options to improve the way we do things or extend the reach of our message to new areas.
There are several institutions that are helping the FATF system to work well and, among them, the FSRBs are in a very special place. I have many years experience working with GAFISUD, the regional body in South America, and I know first-hand how much FSRBs can and do contribute to the global fight against money laundering and terrorist financing. I believe that it is important that the FATF analyse in more depth the role played by all such institutions and devise clearer mechanisms for work sharing, co-ordination and co-operation with them, taking into account their characteristics, policies and capacities. This will help design better policies and practices, and increase the range of countries applying them.
FSRBs deliver the global AML/CFT message; monitor their members’ progress in implementing the 40+9 Recommendations; and are instrumental in providing feedback and GAFISUD highlighting regional issues that can inform policy directions taken by the FATF. The FSRBs are vehicles for a larger discussion of ideas and realities and a path for conveying them to FATF. They are the communication channels for most of the countries to present their views. In addition, FSRBs in many regions are the key focal point for technical assistance and training.
The FATF now comprises 32 jurisdictions and 2 organisations. The Republic of Korea and India are currently FATF observer countries and hopefully they too will soon be FATF members. Additionally, the FATF has strengthened engagement with over 140 jurisdictions which are members of FSRBs; this broadened membership has already brought many benefits to the FATF system.
In fact, there are now 180 jurisdictions across the globe which are members of an FSRB or of the FATF. And maybe when the Union of Comoros becomes a full member of ESAAMLG, we will be 181. This means there are 180 jurisdictions which have committed themselves to combat money laundering and terrorist financing. There are 180 jurisdictions which have committed themselves to implement the FATF Recommendations. This is a formidable force for good. Together we can strengthen the resistance of each of our countries to money laundering and terrorist financing. Sometimes this is forgotten, but we will get additional benefits from that: together we can enhance good governance and reduce corruption. We can promote stronger and more coordinated institutions, reduce the misuse of public funds and tax evasion, and provide a fair competitive environment for business to grow. We can contribute to improving the lives of many people. We can help develop our countries.
I would like to conclude by mentioning briefly that your countries, as members of an FSRB, are welcome to participate in FATF meetings, processes and projects. The FATF benefits from the input of ESAAMLG and of its members. If you have matters or different perspectives you think should be considered, please contribute. The global effort to combat money laundering and terrorist financing is made richer and stronger by the active input from the many countries around the world. I count on your support for this year.
I wish you well for a productive meeting today.
Thank you very much for you attention.
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