Global Anti-Money Laundering and Counter Financing of Terrorism Developments – By Juliet Ibekaku,Special Assistant to the Hon. Attorney-General and Minister of Justice. and Adviser Anti-Corruption/Anti-Money Laundering/Asset Recovery J4A/DFID, Nigeria

Overview of Presentation  UN Conventions  The FATF Recommendations on Money Laundering and Terrorist Financing starting from 1990, 1996, 2003, and 2012  The Key Elements prior to 2012  Key Elements under the 2012 Recommendations  Africa and Challenges of Implementing AML/CFT Provisions

Overview of Presentation  Provide a short overview of Financial Action Task Force (FATF) Recommendations  Enhance Participants’ Understanding of Global Anti- Money Laundering and Combating of Financing of Terrorism  Discuss the Implementation Procedure for Recommendations that are relevant

Relevant International Standards and Conventions  The UN Conventions:  United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988 (otherwise known as the “Vienna Convention”);  United Nations Convention Against Transnational Organized Crime, 2000 (otherwise known as the “Palermo Convention”).  United Nations Convention for the Suppression of the Financing of Terrorism, 1999 (SFT Convention)  United Nations Convention Against Corruption, 2005 (UNCAC)

Relevant International Standards and Conventions  Financial Action Task Force 40 Recommendations on Money Laundering and 9 Special Recommendations on Terrorist Financing (referred to as FATF Recommendations)  Relevant United Nations Security Council Resolutions (UNSC Res) related to the prevention of the financing of terrorism, 1267 (1999), 1373 (2001),and 1390 (2002)  Other Related Foreign Jurisdiction Laws on Money Laundering, Financing of Terrorism and Weapons of Mass Destruction (US FCPA, US PATRIOT Act and UK Anti-Bribery Act – Extent of impact on Nigerian Financial Institutions)

The Mandate of the Financial Action Task Force (FATF)  Financial Action Task Force (FATF) is a standard setting and policy making body that was established by the G-7 Summit in  It is made up of 32 member countries and 2 International Organizations.  It has a network of over 180 jurisdictions through the FATF-Style Regional Bodies, such as GIABA, CFATF, GAFISUD,MONEYVAL, APG and other international organizations.

Mandates of FATF Sets international standards to combat money laundering and terrorist financing. Assessese members’ compliance with the FATF standards through a peer review process of mutual evaluations. Conducts typologies study of money laundering and terrorist financing methods, trends, and techniques and recommend policies to address emerging threats

Mandates of FATF  1990: The FATF Secretariat developed the Recommendations which are commonly referred to as “40 Recommendations”.  The Recommendations were adopted by the G7 and they mandated FATF to implement the Recommendations.  The Recommendations were revised in 1996, 2001, 2003, and  A 2012 Revised Recommendations has just being released.

Mandates of FATF  In 2001, FATF expanded its mandate to include the Combating of the Financing of Terrorism and developed another set of 8 Special Recommendations (SRs) against Terrorist Financing.  October 2004: Another Recommendation was added to the 8 SRs, thus bringing the total number to 9 SRs.

FATF and Financial Institutions (Fis)  Relevance of Recommendations to FIs: - to secure a more transparent and stable financial system that is more attractive to foreign investors; - Policies to ensure that financial institutions are not vulnerable to infiltration or abuse by organized crime groups;

FATF and FIs  Tools to combat financing of terrorism and trace and disrupt terrorists assets.  Standards that enable countries to meet binding international obligations, and avoid the risk of sanctions by the international community.  Polices to strengthen the capacity of legal, financial and law enforcement systems and institutions in a country.

The 2004 FATF Recommendations The 40 Recommendations covers a set of countermeasures against money laundering which cut across the following issues - The Legal Systems; Financial and Non-Financial Systems; Law Enforcement Systems; and International Cooperation.

FATF Preventive Measures -The Recommendations require countries to ensure that Financial Institutions (FIs) and Designated Non Financial Businesses and Professions (DNFBPs) are fully in compliant with, and are implementing the FATF Recommendations on - Customer Due Diligence, -Reporting of Suspicious Transactions, -Compliance Function -Record Keeping

FATF Preventive Measures  Customer Due Diligence (CDD) and Record Keeping - Rs. 4,5,6,7,8,9,10,11, and 12, SR. VII -Abolish bank secrecy laws – R. 4; -Identify and verify customers’ identity – R. 5; -Identify beneficial owners, ownership and control structure of legal persons and arrangements – R.5; -Obtain information on the intent and purpose of business relationship and transactions, and where necessary source of funds-R. 5; -Establish risk management systems – R. 5;

FATF Preventive Measures -Conduct enhanced CDD on Politically Exposed Persons (PEPs) – R. 6; -Conduct CDD on transactions with cross-border correspondent banking and similar relations ships-R. 7; -Develop mechanisms for addressing risks associated with emerging technologies, and non- face to face transactions – R. 8;

FATF Preventive Measures  Reliance on third parties or intermediaries must also undergo CDD process –R.9;  Records related to transactions – national or international, including identity of persons must be kept for a minimum period of five years and must be made available to competent authorities for investigation-R.9; and  Review of all complex, unusual and large transactions with no apparent economic or visible lawful purpose – for the purpose of establishing any criminal activity – R.11.

FATF Preventive Measures FIs and DNFBPs are required to implement effectively the following measures: Rs. 13,14,15, and 16 -Suspicious Transactions Reports (STRs) should be filed with the Financial Intelligence Units (FIUs)-R.13 and R.16; -FIs and DNFBPs officials to be protected by law from criminal, civil, and administrative liability when reporting in good faith, and are required not to disclose the report of STRs to FIUs – R. 14;

FATF Preventive Measures  FIs and DNFBPs are required to develop internal controls, hire and screen staff members, train staff on AML/CFT compliance measures and conduct periodic checks on the internal system –R. 15.

FATF Preventive Measures -Special attention should be paid to transactions from countries that do not have adequate AML/CFT measures in place- R. 21; -FIs should apply AML/TF measures to branches, and subsidiaries, nationally and internationally – R. 22;  Countries/FIs should ensure that Shell banks are not permitted to operate in the country and FIs should desist from dealing with such Shell banks – R. 18;

FATF Preventive Measures -FIs and DNFBPs should be subject to adequate regulation and supervision by competent authorities to ensure the effective implementation of FATF standards - 23; -Competent authorities should develop guidelines for FIs and DNFBPs, including a system of feed back to ensure proper implementation of FATF and national standards – R. 25.

SANCTIONS Rs. 17,18,19, 20,21,22,23, 24, and 25. -civil, criminal, and administrative sanctions should be applicable to FIs and DNFBPs that fail to comply with these measures – R. 17;

Overview of Changes in the 2012 FATF Recommendations  Mandate: - FATF …. develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. - FATF … recognized as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.

New Measures – FATF 2012  The FATF revisions address new and emerging threats, clarify and strengthen many of the existing obligations, while maintaining the necessary stability and rigour in the Recommendations.  revised to strengthen the requirements for higher risk situations, and to allow countries to take a more focused approach in areas where high risks remain or implementation could be enhanced.

New Measures – FATF 2012  Requires countries to first identify, assess and understand the risks of money laundering and terrorist finance that they face, and then adopt appropriate measures to mitigate the risk.  most measures previously focused on terrorist financing are now integrated throughout the Recommendations, therefore obviating the need for the Special Recommendations – especially Rs. 5, 6, 8

New Measures – FATF 2012  FATF’s mandate was expanded to include dealing with the financing of proliferation of weapons of mass destruction. – Now implemented under R. 7  R.7 is aimed at ensuring consistent and effective implementation of targeted financial sanctions on proliferation of WMD when these are called for by the UN Security Council.

Application of Risk-Based Approach (RBA) in Compliance Functions  Important to note the emphasis placed on RBA in certain specific circumstances but also the need for RBA to underline the entire AML/CFT policy of every country.  See specific Recommendations on CDD ( R.10); PEPs (R.12); New Technologies (R.15); High Risk Countries (R.19) DNFBPs (R.22)

Current Anti-Money Laundering Trends in Africa  African Countries have generally adopted the Financial Action Task Force Recommendations on Money Laundering and Financing of Terrorism and relevant UN Conventions.  Most African Countries have adopted the FATF 40 Recommendations on Money Laundering and the 9 Recommendations on the Combat of Terrorism in their national laws.

Current Trends -2  In subscribing to FATF Standards, countries are required to belong to FATF-Regional Styled Groups.  These Groups are located in West Africa, Eastern and Southern Africa, the North Africa and in Central Africa.

FATF-Regional Styled Bodies in Africa  West African FATF-Styled Group is referred to as the “INTER-GOVERNMENTAL ACTION GROUP AGAINST MONEY LAUNDERING IN WEST AFRICA (GIABA) GIABA is based in Dakar, Senegal and has 15 member countries. To get more information on GIABA, visit

FATF-Regional Styled Bodies in Africa  In the Eastern and Southern Africa, the FATF Group is referred to as the “Eastern and Southern African Anti-Money Laundering Group (ESMAALG) with 15 member countries who subscribe to FATF standards. See

FATF-Regional Styled Bodies in Africa  The Northern African countries are grouped under the “Middle-East and Northern African Financial Action Task Force (MENA-FATF). Within this group, 6 Northern African countries subscribe to the FATF standards on money laundering and financing of terrorism. See for more information.

FATF-Regional Styled Bodies in Africa  Within the Central African region, a new group named The Anti-Money Laundering Group in Central Africa (GABAC) is in the process of developing its mandates for integration into the FATF-Regional Styled Group membership. For more information, see

Level of Compliance with AML/CFT Standards  It is important to note that not all the countries are at the same level in the adoption and implementation of anti-money laundering standards.  Although most countries have enacted laws and some have commenced implementation at the level of their financial and non-financial institutions, huge gaps still remain in terms of the compliance level.

Level of Compliance with AML/CFT Standards  For countries that have been evaluated by the regional groups, their level of AML compliance is determined by an assessment of their legal and financial regime compliance; and  law enforcement institutions implementation of anti-money laundering and financing of terrorism national and international standards

Sanctions for non-compliance  For countries that have significant deficiencies, the FATF Secretariat and regional groups are expected to issue public statements in that regard.  Sierra Leone is the only country where an African Regional body – GIABA has issued a public statement for apparent and strategic AML/CFT deficiencies (source: and

Sanctions for non-compliance  FATF has also issued public statements on some of the countries in the region where strategic deficiencies exist in their legal and regulatory AML regime such as Nigeria, Kenya, Ethiopia and Sao Tome and Principe. For further information visit - gafi.org/document 55/0,3746,en_ _ _ _1_1_1_1,00.htmlhttp:// gafi.org/document

Sanctions for non-compliance  In another category of countries under FATF’S PROCESS FOR IMPROVING GLOBAL AML/CFT COMPLIANCE” the following countries were listed – Namibia, Sudan and Zimbabwe.  In another category, FATF also listed Ghana and Tanzania as countries that have not made progress in improving strategic AML/CFT deficiencies.

The Challenges  Within the countries identified by FATF as having strategic deficiencies, some common challenges arise: They are issues related to -Inadequacy of AML/CFT regulatory and legal regime; -Inadequate Customer Due Diligence measures; -Weak financial supervisory regime;

The Challenges  Inadequate legal framework to trace, freeze and confiscate terrorist assets; and  Absence of FIUs or where they exist, they lack operational autonomy.  For most part, AML/CFT issues are not on top of political agenda of most African governments – for some it is part of an international campaign to deny Africa of “foreign investments!”

Looking into the Future  For most African countries, the challenge lies in building the capacity of institutions that are saddled with the review of AML/CFT laws and regulation; supervision of financial and non- financial sector institutions for compliance; and law enforcement and judicial institutions  Above all, ensuring that AML/CFT is a priority for countries seeking to play a greater role in the international financial market is critical

Looking into the future  The FATF public statements are important in building pressures, beyond that, other countries must also apply counter-measures and ensure that financial institutions in their countries do not permit stolen funds to be lodged in their financial systems  The role of financial institutions is critical and they should be encouraged by governments to cooperate in a more friendly manner.

Looking into the Future  Providing technical support to these countries is essential in building up their capacity;  Technical Assistance from donors such as the British Government funded DFID and US Government have been helpful in improving the AML/CFT regime in most countries;  Support is also required for financial and non- financial institutions to understand their roles.

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