Capacity Enhancement Program on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) March 30, 2005 Emiko Todoroki The World Bank

AML/CFT – Global Problem, Global Effort - Money laundering and terrorist financing can threaten the security and stability, transparency and efficiency of financial system. Money laundering and terrorist financing can threaten the security and stability, transparency and efficiency of financial system. US $1 Trillion is laundered every year. US $1 Trillion is laundered every year. Strengthening the AML/CFT regimes is important to prevent money laundering and terrorist financing. Strengthening the AML/CFT regimes is important to prevent money laundering and terrorist financing.

Many Positive Implications! Many Positive Implications! Enhance financial market integrity Enhance financial market integrity Enhance efficiency and capacity in detection of corruption/bribery and financial fraud schemes Enhance efficiency and capacity in detection of corruption/bribery and financial fraud schemes Discourage growth of the underground economy, including tax evasion and tax avoidance Discourage growth of the underground economy, including tax evasion and tax avoidance Increase the tax base and government revenues Increase the tax base and government revenues Promote the legitimate private sector Promote the legitimate private sector Improve financial sector supervision by making macro-economic date more reliable Improve financial sector supervision by making macro-economic date more reliable Etc. Etc.

Increasing TA Needs Awareness raising Awareness raising Legislative and regulatory framework Legislative and regulatory framework FIU FIU Financial sector and non-financial businesses and professions Financial sector and non-financial businesses and professions Law enforcement Law enforcement Inter-agency and international cooperation Inter-agency and international cooperation Etc… Etc…

Lessons Learned from the Policy Dialogue Series Strengthening the Collaborative Process to build effective AML/CFT regime Strengthening the Collaborative Process to build effective AML/CFT regime The stakeholders include policymakers, judicial authorities, law enforcement agencies, FIU, financial regulatory and supervisory authorities, FIs, NBFIs, IOs The stakeholders include policymakers, judicial authorities, law enforcement agencies, FIU, financial regulatory and supervisory authorities, FIs, NBFIs, IOs Dialogues with 24 countries. Dialogues with 24 countries.

Lessons Learned – cont. Importance of an effective consultative mechanism between public and private sectors. Importance of an effective consultative mechanism between public and private sectors. Discussion Outcome: Discussion Outcome: Strong PPP and more dialogue improve decision making in particular when authorities understand local conditions and the private sector grasps the AML/CFT regimes implementation requirements.

Then How? 1. Display commitment and political will 2. Establish a national coordination group 3. Establish an implementation working group 4. Issue clear rules, regulations and guidance notes 5. Launch public awareness campaigns

Then How? 6. Build trust 7. Develop consultative forums 8. Forge PPP with FIUs and reporting entities 9. Develop a feedback mechanism 10. Establish ongoing training for both public and private sectors

1. Display commitment and political will Ensuring true commitment and resolute political will Ensuring true commitment and resolute political will Demonstrate true commitment in many ways – regular meetings with the private sector, seminars, workshops, dissemination of information (web-site), newsletters, awareness raising campaigns. Demonstrate true commitment in many ways – regular meetings with the private sector, seminars, workshops, dissemination of information (web-site), newsletters, awareness raising campaigns.

2. Establish a national coordination group High-level interagency committee or council to lead a national effort to develop an effective AML/CFT regime High-level interagency committee or council to lead a national effort to develop an effective AML/CFT regime Multidisciplinary approach (stakeholders) Multidisciplinary approach (stakeholders) Develop a national strategy Develop a national strategy Facilitate interagency cooperation Facilitate interagency cooperation E.g. National Coordination Committee of Malaysia founded in April ministries and government agencies, led by BNM. E.g. National Coordination Committee of Malaysia founded in April ministries and government agencies, led by BNM.

3. Establish an implementation working group Sublevel committee/working group/task force Sublevel committee/working group/task force Monitor progress and mechanism Monitor progress and mechanism Led by FIU or another leading governmental body Led by FIU or another leading governmental body

4. Issue clear rules, regulations and guidance notes Regulators/supervisors should provide guidance on AML/CFT program requirements (not just administrative authority!) Regulators/supervisors should provide guidance on AML/CFT program requirements (not just administrative authority!) Ensure legal protection/safeguard provision for the private sector Ensure legal protection/safeguard provision for the private sector Develop a risk-based approach for financial supervisors and FIs Develop a risk-based approach for financial supervisors and FIs

5. Launch public awareness campaigns Changing the culture and mindset (at many levels including FI employees and their clients) Changing the culture and mindset (at many levels including FI employees and their clients) Consider local aspects Consider local aspects Highlight the importance of PPP Highlight the importance of PPP Via media (radio, television), and publications (pamphlet, newsletters, etc) Via media (radio, television), and publications (pamphlet, newsletters, etc)

6. Build trust Building mutual rust and confidence between public and private sector Building mutual rust and confidence between public and private sector How to develop trust? How to develop trust? Ongoing collaboration with reporting entitiesOngoing collaboration with reporting entities Open communicationOpen communication Consultation with the private sectorConsultation with the private sector Training and TA to the private sectorTraining and TA to the private sector AML/CFT manuals and guidance notes for the private sector (Lesson 4)AML/CFT manuals and guidance notes for the private sector (Lesson 4)

7. Develop consultative forums Role of professional and industry associations Role of professional and industry associations Training Training Self-regulations Self-regulations Code of conduct Code of conduct Organize public-private sector forums – new trends and typologies, industry concerns, etc. Organize public-private sector forums – new trends and typologies, industry concerns, etc. Organize FI form – share information, find a common solution, etc. Organize FI form – share information, find a common solution, etc.

8. Forge PPP with FIU and reporting entities Ensuring trustful relationship between FIU and reporting entities. Ensuring trustful relationship between FIU and reporting entities. On-going dialogue through regular meetingsOn-going dialogue through regular meetings Consultation with the private sectorConsultation with the private sector Joint initiatives (seminars, public awareness campaigns, etc)Joint initiatives (seminars, public awareness campaigns, etc)

9. Develop a feedback mechanism Provide appropriate feedback to the private sector Provide appropriate feedback to the private sector Different type of feedback – typologies, statistics, trends and patterns on ML/FT, specific case- oriented information, etc. Different type of feedback – typologies, statistics, trends and patterns on ML/FT, specific case- oriented information, etc. Additional information such as a list of terrorist groups, etc. Additional information such as a list of terrorist groups, etc.

10. Establish ongoing training for both public and private sectors Education, education, education! Training, training, training! Educate all the relevant constituencies Educate all the relevant constituencies Institutionalize the training program Institutionalize the training program e.g. Egyptian Banking Institute, etc

AML/CFT in Pakistan Draft AML legislation Draft AML legislation Concerned agencies need to build their AML/CFT capacity. Concerned agencies need to build their AML/CFT capacity. Financial institutions need to comply with new regulations. Financial institutions need to comply with new regulations. Training will play a key role. Training will play a key role.

Capacity Enhancement Program on AML/CFT Help build institutional capacity to strengthen AML/CFT regime. Help build institutional capacity to strengthen AML/CFT regime. Offers tools, skills and knowledge Offers tools, skills and knowledge Gains comprehensive knowledge on AML/CFT Gains comprehensive knowledge on AML/CFT Multi-year global program with customized deliveries in regions and countries Multi-year global program with customized deliveries in regions and countries Scaling up the training activities to government officials and financial and designated non-financial sectors, using the technology if appropriate. Scaling up the training activities to government officials and financial and designated non-financial sectors, using the technology if appropriate. Countrys lead AML/CFT agency monitor and coordinate the training delivery in various government agencies and FIs responsible for AML/CFT. Countrys lead AML/CFT agency monitor and coordinate the training delivery in various government agencies and FIs responsible for AML/CFT.

Comprehensive Training Course as a Base for Capacity Enhancement Comprehensive e-learning covering the following 7 Modules + 1 for FIs as a self-study or a facilitated on- line course Comprehensive e-learning covering the following 7 Modules + 1 for FIs as a self-study or a facilitated on- line course 1.Developmental Implications of Money Laundering/Terrorist Financing and International Standards 2.Legal System and Legislative Requirements in Meeting International AML/CFT Standards 3.Regulatory and Institutional Requirements for AML/CFT Compliance 4.Building an Effective Financial Intelligence Unit 5.International and Inter-agency Cooperation 6.Combating the Financing of Terrorism 7.Investigating Money Laundering and Terrorist Financing 8.AML/CFT Compliance for Financial Institutions

Module on AML/CFT Compliance for Financial Institutions Summary of Content 1. Understanding what money laundering & terrorist financing is all about 1. Understanding what money laundering & terrorist financing is all about 2. Understanding the international Background 2. Understanding the international Background 3. Key elements of an AML / CFT policy 3. Key elements of an AML / CFT policy 4. Customer Due Diligence 4. Customer Due Diligence 5. Risk based approach to AML/CFT controls 5. Risk based approach to AML/CFT controls 6. Risk Management 6. Risk Management 7. Identification of suspicious transactions / activity 7. Identification of suspicious transactions / activity 8. Reporting of suspicious transactions / activity 8. Reporting of suspicious transactions / activity 9. Monitoring & screening of customers & transactions 9. Monitoring & screening of customers & transactions 10. Record Keeping 10. Record Keeping 11. Training & awareness 11. Training & awareness 12. Compliance & Legal 12. Compliance & Legal 13. Audit Function 13. Audit Function

Overview of the Program There are 4 phases: There are 4 phases: Phase 1: Training of trainers Phase 2: Distance learning course Phase 3: Action Plan Phase 4: Global Conference

Phase 1: Training of Trainers Face-to-face workshop Face-to-face workshop Focus on reviewing the training course and customizing the program to the specific needs of a country or region Focus on reviewing the training course and customizing the program to the specific needs of a country or region Workshop for trainers from FIUs, Financial regulators/supervisors, Prosecutors and Law enforcement, etc. Workshop for trainers from FIUs, Financial regulators/supervisors, Prosecutors and Law enforcement, etc. Need nomination of the trainers from relevant government agencies. Need nomination of the trainers from relevant government agencies.

Phase 2: Distant Learning Course Reaching out to more participants. Reaching out to more participants. Provides an opportunity to interact with experts and colleagues from the region. Provides an opportunity to interact with experts and colleagues from the region. Community of Practice where participants continue a discussion via e- mail or on-line to pose questions and exchange information. Community of Practice where participants continue a discussion via e- mail or on-line to pose questions and exchange information. Trainers play a key role in facilitating. Trainers play a key role in facilitating.

Phase 2: Distant Learning Course Audience: Policy makers, regulators, financial supervisory authorities, prosecutors, law enforcement officials, Financial Intelligence Unit staff, and financial institution compliance staff Audience: Policy makers, regulators, financial supervisory authorities, prosecutors, law enforcement officials, Financial Intelligence Unit staff, and financial institution compliance staff Delivery Mode: A blend of e-learning and videoconference sessions to provide a live discussions. Delivery Mode: A blend of e-learning and videoconference sessions to provide a live discussions. Duration: Expected to complete one module per week but can be flexible. Duration: Expected to complete one module per week but can be flexible. Language: English and other languages if necessary. Language: English and other languages if necessary.

Phase 3: Action Plan Develop an action plan (short-term and long term) Develop an action plan (short-term and long term) Strategy on delivering training where trainers are expected to deliver the training course to their own staff or covered institutions. Strategy on delivering training where trainers are expected to deliver the training course to their own staff or covered institutions. Needs assessment on technical assistance and training Needs assessment on technical assistance and training Advisory and other assistance by experts during the course of implementing the action plan Advisory and other assistance by experts during the course of implementing the action plan

Phase 4: Global Conference Global conference (face-to-face) in 2007 (expected) Global conference (face-to-face) in 2007 (expected) Bring together representatives of all the countries who participated in the program Bring together representatives of all the countries who participated in the program Share experiences in implementing the action plans Share experiences in implementing the action plans Report the lessons learned and challenges faced Report the lessons learned and challenges faced

Contact Ms. Emiko Todoroki Finance and Private Sector Group, World Bank Institute/ Financial Market Integrity Unit, World Bank Tel: , Fax: