Most countries have yet to make sufficient progress on preventing legal persons and arrangements from being abused for money laundering and terrorist financing according to a landmark report published by the Financial Action Task Force (FATF).

Report on the State of Effectiveness and Compliance with the FATF Standards, which gives a comprehensive overview of the state of global efforts to tackle money laundering, terrorist and proliferation financing, also found that many countries experience difficulties in investigating and prosecuting high-profile cross-border cases.

The report concludes that while countries have made considerable progress in implementing the technical requirements of the FATF standards, greater effort is needed to ensure that effective implementation is taking place.

Beneficial ownership

Unlike most other areas, both technical compliance and effectiveness are below average across the world in terms of transparency and beneficial ownership according to the report.

It highlights that activities like nominee relationships are still an important vulnerability in many jurisdictions and that these relationships can be used to circumvent measures intended to prevent the misuse of legal persons.

While an increasing number of countries now have legal powers to collect beneficial ownership information and apply sanctions, the number of countries with the right combination of laws and regulations remains limited overall the report concludes.

International cooperation

While most countries demonstrated effective formal and informal international cooperation, the extent and rate at which this cooperation is taking place does not seem to align with the outputs reported elsewhere in the report, the authors concluded. Outputs that do not align include investigations with a cross-border element, joint supervisory activities, and administrative asset recoveries.

The report says this suggests that the current level of international co-operation is not having an impact on successful or effective money laundering and terrorist financing investigations and asset recovery.

Overall conclusion

“Many countries continue to take a “tick box” approach to adopting laws and regulations, and don’t focus on results,” the report states.

It says countries need to make fundamental or major improvements to their money laundering and terrorist financing systems and this can only be achieved if countries redouble their efforts.

The FATF suggests its peer review process will help apply pressure and incentivise greater progress and the task force says it will continue to evaluate how it assesses countries, if necessary making changes to its assessment methodology and procedures as risks to the global financial system evolve.

Report on the State of Effectiveness and Compliance with the FATF Standards can be found here.

Categories: Trade Based Financial crimes News

Tags: beneficial ownership, FATF, FATF Standards, Money laundering, proliferation financing, terrorist