Experts Warn Of Tough Times Ahead For The FATF

by Caroline Maxwell, Tax-News.com, London

09 October 2001

Experts are warning that the 30 member Financial Action Task Force faces unprecedented challenges in its new role as anti-terrorist watchdog, and there are doubts as to whether the multilateral body will be able to cope.

The US Treasury Secretary, Paul O'Neill seems confident enough, and after an emergency meeting with G7 counterparts, made the confident announcement that: 'We are going to pursue the financiers of terror like they've never been pursued before.'

However, the FATF has never had to cope with such a large scale operation before, and there are fears that its existing powers are not adapted to, and therefore will not be effective in, the crackdown on terrorism. Established more than ten years ago by the Group of Seven industrialised countries to pursue countries seen to harbour funds from drug trafficking, criminal activity, and tax evasion, the FATF's only weapon to force 'uncooperative' countries to comply with international standards at present is the threat of sanctions.

However, as critics have pointed out, not even its own member countries have always followed the rules, and America found itself in the spotlight earlier this year when it failed to introduce satisfactory anti-money laundering rules.

Now the FATF must frame and try to enforce new banking rules requiring financial institutions to find out not only how their clients made their cash, but whether they are connected in any way to terrorist activity, and this looks to be no mean feat.

Experts have warned that even when the new rules have been developed, assuming that it is possible for the FATF to effectively enforce them, progress is likely to be slow; the search for clues about terrorist activity in the millions of bank transfers and accounts that make up the global financial system has been described by many as 'looking for a needle in a haystack'.

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