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Mister Chairman and distinguished MONEYVAL delegates and friends, good morning.
I am very pleased to be able to address the MONEYVAL Plenary here at the Council of Europe in Strasbourg. The last time I attended a MONEYVAL Plenary was in February 2007 as the head of the Brazilian delegation during the joint FATF/MONEYVAL Plenary. However, as you know, I also had the honour of addressing many of you more recently, along with Mr. Kirov, at the opening of the joint FATF/MONEYVAL typologies meeting in Monaco. Again, I’d like to thank MONEYVAL, and Monaco as well, for their role in organising that event and to express my appreciation for the engagement of individual MONEYVAL delegations and the Secretariat which together made that meeting such a success.
Two years ago, MONEYVAL was among the first FATF-style regional bodies to become an associate member of the FATF. This status recognises the critical role played by MONEYVAL in the global network, its leadership in the European region in combating money laundering and the financing of terrorism and seeks to integrate you more closely in the work of the FATF and other FSRBs.
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.
The Standards and Mutual Evaluations
Money laundering and terrorist financing techniques evolve quickly, and they therefore continuously present new threats to our financial systems. We live in an increasingly interconnected world, and money launderers will exploit any gaps in our AML/CFT measures, whether that be at the national level or 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 thus essential to facing up to criminal and terrorist misuse of the financial system.
A central element of the business of the FATF – and indeed of MONEYVAL – 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. For this purpose, FSRBs, such as MONEYVAL, provide essential focal points in their regions and are important for supporting national efforts and promoting consistency in application of the FATF standards.
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 can understand what we have achieved and what more needs to be done. The mutual evaluation process is a critical learning experience for us all.
Within the FATF, we have now concluded more than two-thirds of our 3rd round of evaluations, which we will finish in mid-2011. I see from your agenda that MONEYVAL is rapidly approaching the end of its 3rd round of evaluations with the evaluations discussed this week (Estonia and Azerbaijan). This is no small task!
Timely publication of the final mutual evaluation reports demonstrates our commitment to the standards and the transparency of this publication process that attracts and reassures other governments and international investors alike. I am pleased to see the mutual evaluation reports of MONEYVAL members are systematically published on the MONEYVAL website.
As you know, mutual evaluation reports are not the end point for either FATF or regional bodies. It is also critical that we have comprehensive follow-up procedures to monitor implementation of the reforms needed to achieve full implementation of the FATF standards. These procedures need to include a full range of actions that can be taken when a member fails to act adequately or in sufficient time to remedy deficiencies in its AML/CFT arsenal.
We must all remember that we are all only as strong as our weakest link; therefore, we must do everything possible to make sure that there are no “weak links”. Indeed, we should see any steps taken in the framework of compliance enhancing procedures as a means of strengthening our systems as a whole. MONEYVAL has been a leader in this area up to now with a clear system of progress reports and compliance enhancing procedures. Moreover, this is an effective mechanism. Indeed, San Marino appears to have made significant progress in the implementation of the international standards under this process, including through the establishment of the FIU. I’m now looking forward to the discussion of the report of Azerbaijan later today.
One more point I would like to make on implementing the standards is that we should not let other problems get in the way of full implementation of the FATF standards. For example, the current economic crisis should not blind us to the continued need to protect our financial systems from misuse by criminals or terrorists. If we let our watch down, the money launderers and terrorist financiers are sure to find a way back in. We must not let short-sighted goals – for example, the desire to repatriate overseas investments – allow us to accept any weakening of our AML/CFT systems. Short-term gains might be gained from such action but with long-term damage to the global AML/CFT network.
Now I’d like to take a couple of minutes to highlight three of my priorities for this year: preparing for the next round of mutual evaluations; low capacity countries; and the role of FSRBs in the FATF.
Preparing for the Next Round of Evaluations
Since the adoption of the 40+9 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. All of this is being done with a view to better preparing for the next round of evaluations that we all have a stake in. I should note that my aim is to provide for a fine tuning – when and if necessary – and not a wholesale revision of the Recommendations. Indeed, we have no intention of changing the goal posts as countries attempt to fully implement the current standards.
Why start thinking about the next round of evaluations before we have finished the current one? 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. Since it will take time to identify, discuss and find solutions for issues that may be raised, we’d better start soon so we will not delay the next round of evaluations. Over the next year the FATF will establish suitable parameters for this work.
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 continuity in implementation of the Recommendations. I am very interested in all proposals that may help to bring more and more jurisdictions into the FATF family and strengthen the global AML/CFT network.
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 about 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 on the situation in these jurisdictions, and we hope that each of those areas will soon show clear progress in addressing the deficiencies in their AML/CFT regimes.
The Role of the FSRBs
There are many contributors that go into making the FATF system succeed. Among the key players – I would almost say the “essential” ones – are the FSRBs. I feel an especially close affinity to the FSRBs because of the many years experience I have had working with GAFISUD, the regional body in South America. I know first-hand the role that FSRBs can and do play in the global fight against money laundering and terrorist financing. I believe that it is important for the FATF to analyse in more depth the role played by all such bodies and establish a clear mechanism for the sharing of work, co-ordination and co-operation, taking into account their characteristics, policies and capacities. This will help us – together – to 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 highlighting regional issues that should inform policy directions taken by FATF. The FSRBs are vehicles for a larger discussion of ideas and realities and a path for conveying them to FATF. They can serve as channels of communication for individual FSRB members 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. In fact, there are now around 175 jurisdictions across the globe which are members of an FSRB or of the FATF. This means there are 175 jurisdictions which have committed themselves to combat money laundering and terrorist financing. There are 175 jurisdictions which have committed themselves to implementing the FATF Recommendations. This is a formidable force for good. Together we can strengthen the resistance of each of our countries against money laundering and terrorist financing.
Sometimes it is forgotten that there are even some additional benefits from the establishment of this world-wide network. For example, 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 and thus help the further development our countries.
I would like to conclude by mentioning briefly that your countries, as members of MONEYVAL, are welcome – and in fact urged – to participate whenever possible in FATF meetings, processes and projects. The FATF benefits from the input of MONEYVAL and of its members. If you have matters or different perspectives that 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.
We can provide you the opportunity of participation…
I wish you well for a productive meeting today.
Thank you very much for your attention.
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