IMF Says It Is Falling Behind With Money-Laundering Work

by Glen Shapiro, LawAndTax-News.com, New York

27 September 2005

The IMF last week admitted that it was falling behind in its efforts to get countries to apply the FATF's revised (2003) anti-money laundering recommendations, and the FATF Special Recommendation IX concerning measures to deter cross-border movements of currency and monetary instruments.

The Fund announced an adjustment of its anti-money laundering/combating the financing of terrorism (AML/CFT) program to focus more on tackling the challenges faced by countries implementing standards and regimes. This decision was based on a review of the Fund and the World Bank's respective work programs following a call by their Boards in March 2004 to make AML/CFT a regular part of the work of both institutions.

The Fund and the World Bank have been delivering an intensive work program that is yielding results in strengthening AML/CFT regimes in their 184 member countries. The review indicates, nevertheless, that the revision of the FATF standard in June 2003 significantly raised the bar for countries' legal, regulatory, and institutional frameworks. Comparing assessments performed before and after the revision, the review shows that all countries are facing difficulties in achieving compliance with the revised standard. It advises that given the complexity of the revised standard, the higher costs of implementation and the competing demands on national resources, there is a need to focus on practical considerations, vulnerabilities, priorities, and sequencing in putting in place AML/CFT regimes.

The review notes that the IMF and the World Bank, in collaboration with other donors, have greatly intensified the delivery of their technical assistance to respond to countries' needs. Nearly 1,000 officials from 111 countries have been trained on AML/CFT, including legal, financial intelligence unit and supervisory issues, and 37 countries have adopted or are in the process of enacting AML/CFT legislation while a number of others are at various earlier stages in the process. However, the review also points out that Fund and Bank resources are limited and urges the donor community to commit additional resources, given the clear and urgent need to support countries in the implementation of the revised standard.

Going forward, the Fund and the Bank will continue their intensive work on AML/CFT focusing on assessments of members' AML/CFT regimes, technical assistance delivery, and broader regulatory and economic policy issues.

They will direct special attention to:

• Better integration of AML/CFT work in the context of the Fund's Article IV surveillance and the Bank's country operations, with particular links to the Bank's anti-corruption work;
• Enhancing work on the design and sequencing of AML/CFT regimes;
• Increasing outreach to raise awareness among parliamentarians and key decision makers on AML/CFT; and
• Continuing to work with the donor community to commit additional resources to meet increasing technical assistance needs for countries.

The review says that the revised FATF Recommendations set a new standard for jurisdictions with the potential for affecting their legal, regulatory, and institutional frameworks. The standard applies to more sectors and has become more rigorous with important consequences for assessments, technical assistance and policy development.

Since the March 2004 Board decisions, the Fund/Bank have completed field work for 12 assessments and the FATF/FSRBs for 13 assessments. Some general observations are emerging from these assessments. Overall compliance with FATF Recommendations in the revised standard is lower across all the assessed countries compared to the earlier 1996 standard. Compliance with the CFT special recommendations is particularly weak.

Compliance with main AML/CFT preventive measures has become more difficult. Countries are just beginning to address AML/CFT obligations for designated non-financial businesses and professions (DNFBPs) and non-profit organizations (NPOs).

Staff have continued to increase assistance to countries and regional organizations. In the 18 months between January 1, 2004 and June 30, 2005, the Bank/Fund delivered some 210 TA projects, including 169 delivered in the field. TA coordination with external partners continues to be a key objective of Fund/Bank efforts. The demand for TA has
increased inter alia because of the need to implement the new requirements and because of the increased awareness of AML/CFT issues.

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