FATF issues another warning about selected Asian jurisdictions

The Financial Action Task Force frequently updates the status of its view on compliance by countries with the AML and CFT standards that it expects those countries to adhere to.  In our view the process is far from ideal but it is currently the best available process by which governments co-opt (or coerce) banks and jurisdictions outside of FATF to do something about the risks of a financial system tainted by criminal proceeds.

We thought we would reproduce what the FATF said about those countries we take an active interest in, namely Indonesia, Thailand, Vietnam, Sri Lanka, Pakistan and, most recently, Myanmar.

Indonesia:

Indonesia has taken steps towards improving its AML/CFT regime. However, despite Indonesia’s high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies, Indonesia has not made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain. Indonesia should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising terrorist financing; (2) establishing and implementing adequate procedures to identify and freeze terrorist assets; and (3) amending and implementing laws or other instruments to fully implement the Terrorist Financing Convention. The FATF encourages Indonesia to address its remaining deficiencies, particularly by passing adequate CFT legislation, and continue the process of implementing its action plan.

Thailand:

Thailand has taken steps towards improving its AML/CFT regime, including by issuing customer due diligence regulations. However, despite Thailand’s high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies, Thailand has not made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain, although Thailand has faced external difficulties from 2009 to 2011 which significantly impacted the legislative process for the necessary laws and regulations. Thailand should continue to work on implementing its action plan to address the remaining deficiencies, including by: (1) adequately criminalising terrorist financing; (2) establishing and implementing adequate procedures to identify and freeze terrorist assets; and (3) further strengthening AML/CFT supervision. The FATF encourages Thailand to address its remaining deficiencies and continue the process of implementing its action plan, specifically enacting its draft CFT legislation.

Vietnam:

Vietnam has taken steps towards improving its AML/CFT regime. However, despite Vietnam’s high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies, Vietnam has not made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain. Vietnam should continue to work with the FATF and APG on implementing its action plan to address these deficiencies, including by: (1) address the remaining issues regarding adequate criminalisation of terrorist financing; (2) establishing and implementing adequate procedures to identify and freeze terrorist assets; (3) making legal persons subject to criminal liability in line with FATF Standards or demonstrating that there is a constitutional prohibition that prevents this; (4) improving the overall supervisory framework); (5) improving and broadening customer due diligence measures and reporting requirements; and (6) strengthening international co-operation. The FATF encourages Vietnam to address its remaining deficiencies and continue the process of implementing its action plan.

Sri Lanka:

Sri Lanka has taken significant steps towards improving its AML/CFT regime. However, despite Sri Lanka’s high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies, Sri Lanka has not made sufficient progress in implementing its action plan. Sri Lanka should continue to work on addressing the remaining issue regarding adequate criminalisation of terrorist financing. The FATF encourages Sri Lanka to address this deficiency and continue the process of implementing its action plan.

Pakistan:

Pakistan has taken significant steps towards improving its AML/CFT regime, including introducing CFT amendments into Parliament. However, despite Pakistan’s high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies, Pakistan has not yet made sufficient progress in fully implementing its action plan, and certain key CFT deficiencies remain. Specifically, Pakistan needs to enact legislation to ensure that it meets the FATF standards regarding the terrorist financing offence and the ability to identify, freeze, and confiscate terrorist assets. The FATF encourages Pakistan to address the remaining deficiencies and continue the process of implementing its action plan.

Myanmar:

Myanmar has taken steps towards improving its AML/CFT regime, including by removing its reservations to the extradition articles of the Vienna Convention, the Palermo Convention and the Terrorist Financing Convention. However, despite Myanmar’s high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies, Myanmar has not made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain. Myanmar should work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising terrorist financing; (2) establishing and implementing adequate procedures to identify and freeze terrorist assets; (3) further strengthening the extradition framework in relation to terrorist financing; (4) ensuring a fully operational and effectively functioning Financial Intelligence Unit; (5) enhancing financial transparency; and (6) strengthening customer due diligence measures. The FATF encourages Myanmar to address the remaining deficiencies and continue the process of implementing its action plan.

We remain concerned as to whether the entire industry that has grown up around AML and, more recently, CFT is the best use of public and private resources to address the serious social wrongs that arise from criminal and terrorist access to the financial system.  Is this the best bang for our buck, no pun intended.

Is strengthening the AML / CFT regime in Myanmar really as important as bringing on economic development and regime change to improve the future of the Burmese people?  Is the FATF ultimately helping or hindering such a deprived country?

It is time for a rethink of the powers and functions of the FATF alongside a proper public debate about its role.