Remarks by David Lewis
FATF Executive Secretary
Victoria Falls, Republic of Zimbabwe, 2 September 2016
President of ESAAMLG,
Honourable Patrick Chinamasa,
Deputy Governor of the Central Bank of Zimbabwe,
Deputy Minister of Finance,
Ladies and gentleman of the private sector, all protocol observed.
I am going to use my 15 minutes of fame today to tell you a bit about FATF and the challenges we are facing from improving the transparency of company ownership and control, countering terrorist financing and de-risking.
The G7 created the FATF in 1989 to tackle money laundering. Today, 198 jurisdictions have committed at the highest level to fully implement the FATF Recommendations on money laundering, terrorist financing and counter proliferation financing.
Critical to the success of fighting these threats is financial inclusion. It's much harder to prevent and detect dirty money if it is forced underground. That is why promoting financial inclusion has always been an important part of what the FATF does.
Thanks to FATF, most countries now have the tools necessary to deprive criminals and terrorists of their funds.
In addition to setting the global standard, the FATF researches the methods criminals and terrorists use to launder and raise their funds.
FATF was also the first international body to assess how effective countries are at implementing global standards in any area.
Beyond this, we review and identify countries with strategic deficiencies that pose a risk to the financial system
This is effective in forcing countries to take action, as it increases the costs of doing business with those countries and deters foreign investment.
The FATF has identified and reviewed 88 countries with strategic deficiencies and named and shamed 59 countries. 48 of these have since made the necessary reforms. A further 30 countries made the necessary reforms without having to be named publicly.
The latest of these includes Panama, which before the Panama papers were made public, and as a result of FATF scrutiny over the last two years, introduced beneficial ownership requirements and regulation of lawyers, accountants and real estate agents.
The challenge we face today, is no longer the absence of the tools needed to do the job.
The challenge today is the effective use of those tools.
Although we are now seeing money laundering convictions and assets seized every day in countries all over the world, the threat from the proceeds of drugs trafficking, human trafficking, fraud, corruption and tax evasion continues to grow.
An enabler of all this criminal activity is the abuse of companies and trusts.
The Panama papers have shone a bright light on the scale of abuse of companies and trusts for a wide range of serious criminal activity, as well as the exploitation of different tax laws by companies and wealthy individuals.
This is why it is so important that we must know who really owns and controls the legal entities and arrangements established in our jurisdictions.
The FATF sets the gold standard on the transparency of legal and beneficial ownership information.
Since the FATF introduced beneficial ownership requirements in 2003, more than 190 countries have been assessed.
Most countries now require their banks, lawyers, accountants and real estate agents to identify the beneficial owner of their customers. But there has not been an equal focus on requiring companies themselves to disclose this information. Countries must now act to ensure the timely availability of accurate and adequate legal and beneficial ownership information.
This is also important in order to counter terrorist financing, which is the top priority for the FATF.
In his address to the UN Security Council in December the FATF President talked about the need for more information-sharing, between agencies domestically, across borders, with and within the private sector. This was one of the key lessons learnt from recent terrorist attacks seen not only in France and Belgium but worldwide. The private sector, financial institutions in particular remain the single largest source of untapped intelligence.
The FATF has developed a consolidated strategy on counter terrorist financing, and has an operational plan to implement that strategy. A key part of that strategy and plan is to improve information sharing and we have work underway to identify best practices among our members in this area.
We have already produced a report identifying risk indicators for the private sector to use to help them identify and report potential terrorist financing. This report was made available to the members of the FATF global network in June, and they are sharing this in confidence with financial institutions and others in their jurisdictions.
The leadership of the G7 and G20 has led to a step change in countries’ commitment to implement the FATF Recommendations.
But none of this can be achieved without an equal step change in the level of collaboration between the public and private sectors. That is why events such as this are vital and must lead to ongoing and continuous partnership, not just more one off events.
A big focus of your discussions today and tomorrow will be de-risking.
Given de-risking is the result of a much broader set of circumstances, well beyond AML/CFT, and in the context of wider financial sector regulatory reforms following the financial crisis, the G20 asked the Financial Stability Board (FSB) to coordinate activity to address de-risking. The work that FATF is doing to clarify regulatory expectations is a key part of this.
The FSB has established a Correspondent Banking Coordination Group made up of senior officials from the FSB and standard-setting bodies. The group is overseeing the implementation of a four-point action plan.
FATF-Style Regional Bodies like the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG) have an important role to play in the third work stream on capacity building, supported by their donors including the cooperating and supporting nations and organizations.
Events like this are important, but much more needs to be done and the private sector need to become trusted and equal partners in this endeavor.
Finally, I would like to encourage you to look beyond de-risking towards doing what you already know needs to be done to strengthen the effectiveness of your AML/CFT measures. It is only by doing so that you can help to reduce and ultimately reverse the current trend of de-risking by the major clearing banks – who by the way are also working hard to improve their own measures, which is necessary to give them and their regulators the confidence necessary to do this business.
I am confident that through better and continuous dialogue between the public and private sector, including with the global clearing banks, and through events such as this, we can successfully fight money laundering and terrorist financing, including through increasing financial inclusion and making better use of new technologies to reduce the costs of compliance and embrace new ways of accessing financial services.
Thank you for the opportunity to address you today and I wish you every success with your discussions today and tomorrow.