FATF Removes Four Countries From Its List

by Ulrika Lomas, Tax-News.com, Brussels

25 June 2001

The Financial Action Task Force released its annual report for 2000/2001 on Thursday last week, saying that it had removed four countries from its list of "non-cooperative countries or territories" in the fight against international money laundering:

Bahamas, Cayman Islands, Liechtenstein and Panama.

There will be delighted celebrations in these places, which have made substantial efforts during the last year to conform to the FATF's 'forty recommendations' which amount to a code of good practice. The FATF, which is effectively a department of the OECD in Paris, was created in 1989, and its existence is reconsidered by the OECD's members every five years. It is next due for review in 2004.

Some other countries won't be as happy as the fab four, though - new countries have been identified as "non-cooperative" and have been added to the list:

Egypt, Guatemala, Hungary, Indonesia, Myanmar and Nigeria.

The following countries, previously identified as "non-cooperative", now face countermeasures for failing to improve their defences against money laundering and will remain on the list:

Russia, Philippines and Nauru.

Other countries originally listed last year remain on the list pro tem:

Cook Islands, Dominica, Israel, Lebanon, Marshall Islands, Niue, St Kitts and Nevis and St Vincent and the Grenadines.

Last year's list had 15 names on it, and that number has now risen to 17. But the FATF also fingers un-listed countries which it thinks are not doing enough to control money-laundering.

It rates all 29 of the OECD's members against 28 of its action recommendations, and the US, for instance, comes third from bottom, being compliant with only 17 of the 28 points.

"We think the way that the [task force] tallies up the score on this issue does not accurately represent the reality," said a US Treasury official. "But you have to try to calculate something and we are willing to live with the results." The US argues that it received a low mark mainly because it has no laws to force insurance companies and bureaux de change to report suspicious transactions. The Treasury official said this policy was under review, although he argued that many countries with more extensive rules got very few reports from institutions other than banks. He said the US remained committed to the work of the task force, despite concerns raised by the Bush administration over a similar global initiative to combat tax evasion in offshore financial centres.

Canada and Mexico rank behind the US, and only nine task force members are fully compliant, including Brazil, Greece and Luxembourg. However the FATF itself says that the survey results should not be taken as a measure of the effectiveness of members' anti money-laundering systems.

While losers made excuses, the four winners waxed triumphant.

"The de-listing provides an authentication of the integrity of our systems", said Wendy Warren, CEO and Executive Director, Bahamas Financial Services Board. " We are very gratified since the de-listing clearly supports the reputation of The Bahamas as a credible financial services jurisdiction. However, it is important to recognize that it is not only in the last six months that the financial systems and institutions in The Bahamas have been subject to adherence to counter money-laundering procedures. For example, since the mid 1980s, the Association of International Banks and Trust Companies (AIBT) in The Bahamas, has subscribed to the codes of conduct including adherence to the principles of the FATF."

"The financial services industry has been operating within this new legislative and regulatory framework since the beginning of this year," said Ian Fair, BFSB Chairman. " All business accepted since the beginning of 2001 is in compliance with this framework and the industry is currently bringing existing business into compliance."

Jose Mara Roldan, the task force's president, said the FATF had proposed conditional sanctions against Nauru, the Philippines and Russia, all on the list last year. He said the three could face more surveillance and reporting requirements if they failed to respond to the criticisms by September 30. By then they must pass "significant legislation" against money-laundering or risk punishments which could include warnings to banks and firms by FATF member states not to do business with them, and measures making it harder for their banks to operate overseas. Russia's response to all this can be imagined - but there is a money-laundering bill in the Duma at present which stands a fair chance of being enacted. Even the notoriously spiky Duma may have to pay attention to the FATF in a year when the country is making serious efforts to join the WTO.

The FATF said that most governments at least make an effort to comply with the FATF's recommendation. Nigeria was the only country that did not participate in its own evaluation: 'We never received any response to our requests for meetings,' Mr Patrick Moulette, the task force executive secretary said.

Click here for the FATF report.

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