Ethics and governance in the European Financial centers

The FATF recently revised its Methodology for Assessing Compliance with the FATF 40 + 9 Recommendations. It is the methodology followed in the mutual evaluation program to assess countries’ anti-money laundering and counter terrorism financing (AML/CFT) systems.

Read revised methodology

The FATF recently published astudy that examines the means used by terrorists to raise funds and the wide variety of methods used to move money within and between organisations. The adaptability and opportunism shown by terrorist organisations suggests that all the methods that exist to move money around the globe are to some extent at risk.

It covers the following areas :
THE TERRORIST REQUIREMENT FOR FUNDS
RAISING TERRORIST FUNDS
MOVING TERRORIST FUNDS
INTERNATIONAL RESPONSE TO TERRORIST FINANCING
POLICY IMPLICATIONS

Read report

Every year the International Narcotics Control Strategy Report is published by the American Department of State (Bureau of International Narcotics and Law Enforcement Affairs).

The 2008 release is worth reading. Copied below are the last paragraph relating to the countries is the framework of this blog.

Cyprus

Cyprus has put in place a comprehensive AML/CTF regime, which it continues to upgrade. Cyprus should ensure not only the passage, but also the full implementation, of the two laws that will tighten the current regime requirements. Cyprus should ensure that it is able to implement the law criminalizing the collection of funds with the knowledge that they will be used by terrorists or terrorist groups for any purpose, not only to commit terrorist or violent acts. Cyprus should enact provisions that allow for civil forfeiture of assets in the future.

Gibraltar

The Government of Gibraltar should continue its efforts to implement a comprehensive anti-money laundering and counter-terrorist financing (AML/CTF) regime. The criminal laws on money laundering should be consolidated, and powers presently available only in drug-related money laundering cases should be extended to money laundering cases involving the proceeds of other crimes. The GOG should introduce legislative provisions to its asset seizure and confiscation regime allowing authorities to confiscate assets, including cash, even without a link to the original criminal proceeds. Gibraltar needs to conduct risk assessment of those designated nonfinancial businesses and professions that are unsupervised and determine and extend the necessary authority to conduct AML/CTF compliance examinations of these entities

Ireland

The Government of Ireland should enact legislation to prohibit the establishment of “shell” companies. Law enforcement should have a stronger role in identifying the true beneficial owners of shell companies as well as of trusts in the course of investigations. Ireland should increase the technical and human resources provided to the FIU to manage and evaluate STRs effectively. The GOI should enact legislation that covers both funding of a terrorist acting alone and funding of two terrorists acting in concert, as well as legislation fully implementing UNSCR 1373. To this end, Ireland should remove the evidentiary requirements acting as obstacles to full compliance, as well as circulate the UN and the U.S. lists to its regulators and obligated entities. Ireland should continue implementation of its new anti-terrorism legislation and its AML law amendments, and ensure stringent enforcement of all such initiatives. Ireland should ratify the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.

Isle of Man

Isle of Man officials should continue to support and educate the local financial sector to help it combat current trends in money laundering. The IOM should act on the 2007 Consultative paper with the MSB/e-money regulation proposals that authorities have discussed, and implement the most effective. The IOM should also ensure that the obliged entities understand and respond to their new and revised responsibilities as delineated by the 2007 AML Code. To this end, the FSC should work to release the Anti-Money Laundering and Terrorist Financing Handbook as soon as possible in 2008. The authorities also should continue to work with international AML authorities to deter financial crime and the financing of terrorism and terrorists.

Jersey

The Bailiwick of Jersey should continue to enhance compliance with international standards. Jersey should ensure that all entities, within all sectors, are subject to reporting requirements. The FSC should work to ensure that the AML Unit has enough resources to function effectively, and to provide outreach and guidance to the sectors it regulates. This is especially true for the newest DNFBPs required to file reports. Jersey should mandate the same AML/CTF requirements over its “exempt” companies that it does over the rest of the obliged sectors. The FSC should distribute the UN, European Union and U.S. lists of designated suspected terrorist and terrorist-supporting entities to the obliged entities and not rely on the entities stay current through Internet research.

Liechtenstein

The Government of Liechtenstein has made consistent progress in addressing the shortcomings in its AML regime. It should continue to build upon the foundation of its evolving anti-money laundering and counter-terrorist financing regime. Liechtenstein should ratify the UN Convention against Transnational Organized Crime and the UN Convention against Corruption. Liechtenstein should enact and implement legislation requiring the reporting of cross-border currency movements and ensure that trustees and other fiduciaries comply fully with all aspects of AML legislation and attendant regulations, including the obligation to report suspicious transactions. The GOL should prohibit the issuance and use of corporate bearer shares. The FIU should have access to additional financial information. While Liechtenstein recognizes the rights of third parties and protects uninvolved parties in matters of confiscation, the government should distinguish between bona fide third parties and others. Liechtenstein should consider discarding its list of predicate offenses in favor of an all-crimes approach.

Luxembourg

The Government of Luxembourg has enacted laws and adopted practices that help prevent the abuse of its bank secrecy laws and has enacted a comprehensive legal and supervisory anti-money laundering regime. Luxembourg has steadily enacted AML/CTF laws, policies, and procedures. However, the scarce number of financial crime cases is of concern, particularly for a country that has such a large financial sector. Luxembourg should take action to delineate in legislation regulatory, financial intelligence, and prosecutorial activities among governmental entities in the fight against money laundering and terrorist financing. The situation is most acute regarding the lack of a distinct legal framework for the FIU whose staff, activities, and authorities are divided among at least four different ministries. The State Prosecutors in the FIU should be exempt from nonfinancial crime duties and the FIU should increase the number of analytical staff to effectively analyze and disseminate the volume of STRs that the FIU receives. Luxembourg should pass legislation creating the authority for it to independently designate those who finance terrorism. Luxembourg would be well served to have the authority to designate suspected terrorists. Luxembourg should also enact legislation to address the continued use of bearer shares and consider specifically extending AML legislation to include SICAR entities. Luxembourg should become a party to the UN Convention against Transnational Organized Crime.

Switzerland

The Government of Switzerland hopes to correct the country’s image as a haven for illicit banking services. The Swiss believe that their system of self-regulation, which incorporates a “culture of cooperation” between regulators and banks, equals or exceeds that of other countries. The primary interest of the Swiss system is to avert bad risks by countering them at the account-opening phase, where due diligence and know-your-customer procedures address the issues, rather than relying on an early-warning system on all filed transactions. The GOS believes that because of the due diligence approach the Swiss have taken, there are fewer STRs filed than in some other countries. At the same time, 82 percent of the STRs that are filed lead to the opening of criminal investigations. While generally positive, Switzerland’s FATF mutual evaluation report nonetheless identified weaknesses in the Swiss anti-money laundering and counter-terrorist financing regime, including problems with correspondent banking and the identification of beneficial owners. Per FATF Special Recommendation IX, the GOS should implement cross-border currency reporting requirements. Switzerland should also put forward effective AML legislation and rules that monitor and regulate money service businesses.

United Kingdom

The United Kingdom has a comprehensive AML/CTF regime. However, as discussed in the FATF mutual evaluation, there are areas that should be further addressed by the authorities. The UK should develop legislation and clearly enforceable implementing regulations to ensure that beneficial owners are identified and verified and that customer due diligence is required and ongoing, regardless of an already established relationship with the client. The UK should also develop clear regulations regarding politically exposed persons as well as correspondent banking relationships. Risk-based measures should be codified and taken, not only in the context of customer due diligence, but also with regard to the identification and treatment of wire transfers, the standards and measures set by the designated nonfinancial businesses and professions, and to more effectively target the resources of the supervisory entities. The 2005 Gambling Act should be amended to require the gaming industry to be covered in the same manner as the financial and designated nonfinancial businesses and professions, including giving the Gambling Commission a full range of sanctions. Authorities should track and examine the effects of the SOCAP change regarding acts and assets in or from foreign jurisdictions, and revisit this legislation to determine whether it has been effective, or whether it has enabled exploitation. Authorities should also ensure the FIU’s operational and authoritative independence.


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